The further deceleration of the domestic inflation rate as of January provides authorities the leeway to keep the central bank’s monetary policy stance steady, the Bangko Sentral ng Pilipinas (BSP) said.

The rate of price increases further slowed to 3 percent in the first month of the year from 3.2 percent in December 2021, the Philippine Statistics Authority (PSA) reported on Friday.

In a statement, the central bank said the slower inflation rate “is consistent with BSP expectations that inflation will decelerate further in (the) coming months, reverting back to the target range over the policy horizon.”

The government’s inflation target until 2024 is between 2 percent and 4 percent.

The BSP slashed its key policy rates by a total of 200 basis points in 2020 to help buoy the domestic economy from the impact of the pandemic.

BSP Governor Benjamin Diokno repeatedly said the key rates would be kept steady as long as necessary to help the domestic economy recover.

Growth, as measured by the gross domestic product (GDP), rose by 7.7 percent in the last quarter of 2021, higher than the previous quarter’s 6.9 percent and a turnaround from the -8.3 percent contraction in the fourth quarter of 2020.

Full-year growth stood at 5.6 percent, surpassing the government’s 5 percent to 5.5 percent growth assumption for 2021.

The sustained economic growth in the fourth quarter of 2021 reflected easing community restrictions and the resulting improvement in mobility and market sentiment, the statement read.

It also noted that “the lingering threat of Covid-19 (coronavirus disease 2019) infections due to more virulent variants and its potential impact on broader global economic activity continue to cast significant uncertainty on the near-term outlook for growth.”

“Given a manageable inflation outlook, the BSP sees ample scope to keep a patient hand on its various policy levers, while keeping an eye on potential risks to inflation and the financial system,” it said.

The BSP said it “stands ready” to respond to emerging developments in keeping with its mandate to promote price and financial stability.

“The Monetary Board will review its assessment of the inflation outlook along with the latest GDP outturn in its monetary policy meeting on 17 February 2022,” it added. (PNA)