Bangko Sentral sees 2011 inflation within target

Philippine inflation for this year would remain within the government's targeted range of 3-5 percent despite the toll hikes and impending wage adjustments, monetary authorities said during weekend. "I am not saying that those things could disanchor the forecast inflation because those have already been factored in our forecast inflation for the year," Bangko Sentral ng Pilipinas (BSP) Deputy Gov. Diwa Guinigundo said at a forum. The central bank always reviews the economy and applies certain measures that allow monetary authorities to plot the path of inflation and stability of prices. Bank regulators maintained that the inflation would stay within the forecast range as foreign capital continues to flow into the country and add peso liquidity into the system. Inflation averaged 3.8 percent last year, well within the forecast range of 3.5-5.5 percent. The stable inflation and inflation expectations both allowed the BSP to keep its policy rates unchanged at 4 percent for lending and 6 percent for borrowing. The record-low interest rates thus allowed the banks to cut their loan rates. Monetary policy is always preemptive and forward-looking, Guinigundo said, noting that the policy-setting Monetary Board sees no reason to make appropriate adjustments in its policy stance as of the moment. This should signal everybody that inflation expectations "remain well-anchored" and that there is no cause for worry that the economy might already be heating up, Guinigundo said. He said that traders should not worry too much about the Department of Labor and Employment's ruling to have another round of wage hikes. Months earlier, the Labor Department also implemented several rounds of wage hikes. Under the law, wage hike adjustments may only be made once a year, he noted. Guinigundo said that some regions of the country have yet to make appropriate adjustments in their salary structures, but the majority of jurisdictions have already done so. A five-percent wage increase in some areas of the country, therefore, should not unduly influence the path of inflation this year, Guinigundo said. — JE/KBK, GMANews.TV