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THE
Bangko Sentral ng Pilipinas (BSP) finally had to
acknowledge Thursday what most analysts and others in
the government have suspected: that inflation would
range beyond the 5-percent ceiling targeted for the
year.
“Depending on the movements in oil and nonoil commodity
prices, inflation could settle above the 2008
inflation-target range,” BSP Governor Amando Tetangco
Jr. said at a briefing in which he also announced the
decision to keep the monetary-policy settings intact.
In
maintaining its overnight borrowing rate at 5 percent
Thursday, the BSP joins central banks in
Indonesia,
Malaysia and Thailand in keeping interest rates on hold
as prices surge amid slowing growth. The decision was
expected by all 17 economists in a Bloomberg News
survey.
Inflation at a 20-month high has kept Tetangco from
easing borrowing costs further after cutting the key
rate to a 16-year low in January. Growth in the
Philippines may miss the government’s target of 6.3
percent to 7 percent this year, Deputy Governor Diwa
Guinigundo had said Monday; and on Thursday, Finance
Secretary Margarito Teves bolstered this view of a
downward adjustment in growth outlook. The $117-billion
economy expanded 7.3 percent in 2007.
“The
central bank will remain patient, balancing inflation
concern against the risk of spillover from a global
downturn,” said David Cohen, director of Asian economic
forecasting at Action Economics in Singapore.
Calls to
increase wages and transport fares may further stoke
prices in a country described as the biggest rice
importer in the world, and which buys nearly all of its
crude oil overseas. The peso, last year’s best performer
in the region, has fallen 1.7 percent this year, making
imports more expensive.
At
Thursday’s briefing, Tetangco said while the central
bank’s borrowing and lending rates of 5 percent and 7
percent, respectively, remain appropriate for the time
being, there were “risks” to be considered.
“In its
assessment, the Monetary Board observed that the balance
of risks to the inflation outlook is tilted to the
upside,” Tetangco said.
Inflation in the first three months already averaged 5.6
percent after price pressures pushed the rate steadily
upward from 2.6 percent in January to 5.0 percent in
February and finally to 6.4 percent in March.
Guinigundo said this was in recognition of the
phenomenal supply-side increases in oil and nonoil
commodities in recent months.
In
addition, there are pending wage and transport fare
increases to consider whose magnitude are not known at
this point.
According to Guinigundo, a daily wage increase of up to
P25 should not be worrisome, but warned that anything
beyond it was worth carefully watching out for.
The
labor sector has agitated for wage increases ranging
from P80 a day up to P125 a day.
Then
there are transport fare hikes to consider as well:
“We’re not sure when this will be implemented and so
timing is very critical.”
An
increase implemented towards the end of the year instead
of earlier would have a larger impact on inflation,
Guinigundo said.
An
increase beyond P25 a day would force the policy-making
monetary board to review the inflation forecast for the
year, he stressed.
According to him, a wage increase of 7 percent was all
that was needed for labor to catch up with increases in
the cost of living.
The
broad idea was to arrive at a reasonable adjustment in
wages to equilibrium was maintained otherwise there
could be a price or wage spiral.
“A
stable price situation is what we all want although that
may be very difficult to achieve,” Guinigundo said. |
