MANILA - The Bangko Sentral ng Pilipinas (BSP) said on Tuesday it has "policy space" to respond to domestic price pressures as it forecast the annual inflation rate could increase in January due to weather-related supply shocks.
The central bank expects annual inflation of 3.4-4.3 percent in January.
If that rate is in the upper end of that range, it would be the fastest pace since November 2011. But a decline in
domestic fuel prices could also have a dampening impact on consumer prices.
"The BSP will continue to monitor not only these domestic price pressures points but also global developments, like shift in sentiment versus emerging market economies as growth prospects on advance economies improve," Governor Amando Tetangco said.
The central bank "continues to have policy space to respond to these and we will make policy adjustments as needed," he said.
January inflation data will be released on Feb. 5, a day before the BSP meets to review policy.
On Dec. 12, the central bank left the overnight borrowing rate unchanged.