The Bangko Sentral ng Pilipinas (BSP) remains confident that inflation – now nearing five percent – will still “likely fall” closer to the midpoint of the target of 2-4 percent next year with the timely implementation of non-monetary measures to temper supply-side pressures on food prices.

“The BSP stands ready to maintain its accommodative monetary stance for as long as necessary to support the economy’s sustained recovery to the extent that the inflation outlook would allow,” BSP Governor Benjamin E. Diokno reiterated in a statement on Tuesday.

The August inflation of 4.9 percent was the top end of the BSP’s forecast range of 4.1 percent to 4.9 percent for the month.

The BSP however still expects the average inflation to be in the upper band of the two-four percent for 2021 but these are still mostly due to supply-side pressures on meat and other food prices.

The BSP said inflation path which is on the rise is consistent with its continued assessment that it will decelerate back to within the target range by end-2021. For this year, the BSP average inflation forecast is 4.1 percent. For 2022 to 2023, the projection for inflation is 3.1 percent.

The central bank said risks to the inflation outlook is still broadly balanced while the the increase in the international commodity prices because of supply-chain bottlenecks and the recovery in global demand continued to have upside pressures to inflation.

The resurgence of COVID-19 variants is a downside risks to both aggregate demand and inflation, said the BSP.

For the sixth policy meetings in a row, the BSP’s Monetary Board has kept the policy rate steady at two percent to support a recovering but still fragile economy.

Diokno said they continue to have “ample monetary policy space” and reiterated that current accommodative settings remain appropriate but that it will take time for policy responses to work its way through the economy and stimulate private consumption and investment.

The BSP noted that business and consumer sentiment have gradually improved but domestic demand continues to be tempered by the uncertainty surrounding the pandemic, especially amid the emergence of the Delta variant and the progress of the vaccination rollout in the country.

In the meantime, Diokno said last week that the Monetary Board policy meeting in November will be more crucial than the September 23 meeting with “major updates” on BSP forecasts and assumptions. “(A) major forecast update (will) form part of the policy discussion in November,” he said.

Before the November 18 policy meeting, the government will announce on November 9 the revised second quarter GDP and preliminary third quarter GDP data and other national accounts.