Salceda doubts BSP's shift to fixed inflation-targeting model, cites risks

Albay Gov. Joey Salceda has doubts about the central bank's recent shift to the fixed inflation-targeting scheme over the medium term from the variable inflation model that regulators used to adopt. Salceda, a former economic adviser in the previous administration, however clarified that the decision was sound and in response only to the recent global events that led the shift to the fixed inflation-targeting model. "The shift to fixed inflation-targeting framework from the variable inflation model is more than feasible, in general. But there are risks and these have not been properly ventilated," Salceda said. He said the Bangko Sentral ng Pilipinas (BSP) has enlightened the corporate world that the medium-term outlook for risks to inflation has been minimal and not probably wider than 4 percent on average. The BSP forecasted that inflation should not go further about the 4-percent line between 2012 and 2014. But Salceda pointed out: "What about other exogenous shocks? The business response to it could be different. What are the risks to the fixed inflation-tergeting regime. This has not been sufficiently explained." This led Salceda to believe that BSP Gov. Amando Tetangco Jr. and the seven-man monetary board failed to achieve its prospects for the fixed inflation-targeting model. Unlike the Eurozone and the United States, he said these large economic centers are already engaged in maintaining fiscal strength by slashing off their expenses so that the risk of demand-driven inflation is sharply lowered in this respect. "We're swimming in a world of fiscal consolidation so there is no source of fiscal inflationary demand. In Europe alone, there are already many countries in trouble," Salceda said. -JE/OMG, GMANews.TV