MANILA -- The economy is "not overheating" and inflation will fall within monetary authorities' 2 to 4 percent target next year, Bangko Sentral ng Pilipinas Governor Nestor Espenilla said Friday.
Inflation will peak in August or September and will average "above 4 percent" this year. Espenilla said his "expectation" was that it wouldn't breach 6 percent.
"No, the economy is not overheating. What we are dealing with is there are extra challenges on top of immediate supply side issues," Espenilla said in an exclusive interview with ANC's The Boss.
"Elevated" inflation is the "immediate challenge" to the BSP, Espenilla said, adding, "We continue to closely monitor the situation so that we will be able to act in an expeditious manner."
Oil is the primary inflation driver while the turmoil in Turkey and the normalization of monetary policy in the US and other markets add an "element of uncertainty," he said.
Espenilla raised the overnight borrowing rate by a total of 1 percentage point in 3 successive policy meetings since May, bringing it to 4 percent, after keeping it unchanged for nearly 4 years.
It is inaccurate to compare the Philippines to Turkey, which is also grappling with rising consumer prices, he said.
"I wouldn’t even say that inflation is spiraling out of control. Yes, it has spiked because of largely supply side factors, but our expectation is it will come back to target soon enough," he said.
"As recent events have shown, we have demonstrated the ability to respond to change in circumstances by moving policy rates as necessary," he said.
Espenilla said the BSP would continue to be data dependent when deciding on monetary policy, when asked if the regulator had suffered from a "loss of credibility" by holding off on a rate increase for as long as it did.
Having access to data, including those that may not be available to the market "imposes a discipline" on the decision-making process, he said.
"We adhere to that carefully, of being guided by the numbers, not by sentiment, not by public clamor or emotion. We have to calculate and look at those numbers," he said.
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