The December 2020 inflation of 3.5 percent was within the BSP’s forecast range of 2.9 – 3.7 percent.

The latest inflation outturn brings the average full-year inflation for 2020 to 2.6 percent, which is well within the national government’s target of 3.0 percent ± 1.0 percentage point.

The BSP continues to expect inflation to settle within the target range over the policy horizon.

The recent uptrend in inflation is seen to be largely transitory reflecting the short-term impact of weather disturbances.

The overall balance of risks to future inflation continues to lean toward the downside owing mainly to the continued uncertainty caused by the pandemic on domestic and global economic activity.

Nonetheless, upside risks emanate from the possibility of an early roll out of Covid-19 vaccines in the Philippines, which is expected to ease the existing lockdown measures and expand further operating capacity of the economy.

At the same time, a stronger-than-expected world economic recovery as the vaccine is increasingly deployed in key economies abroad could present upward price pressures on global oil and food prices.