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The inflationary impact of the new tax law that took effect this year according to The Bangko Sentral ng Pilipinas would be at below 1% as Department of Finance expects 3.2% last month in terms of consumer price index.

Diwa Guinigundo, Deputy Governor of The Bangko Sentral ng Pilipinas said that the impact of Republic Act 10963 (Tax Reform for Acceleration and Inclusion Law) would not guarantee a policy response from the Monetary Board of Central Bank.

“On the TRAIN, the impact on inflation is less than one percentage point. But that hardly justifies a monetary response from the BSP because the impact is on the supply side,” he said.

To support the expanding economy of the country, monetary authorities have been allowed to keep an accommodative stance.

“We shall consider adjusting our monetary stance when second-round effects are triggered because the demand side would be upset, generating demand pressure for higher wages and higher transport fares,” he added.

Do note that TRAIN is a fiscal policy and the Central Bank has the power to make monetary policy to curb or stimulate inflation as it sees fit on the current standing of the economy.

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