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INFLATION, the rise in prices of goods and services and
the corresponding drop in a currency’s purchasing power,
will likely hit double digit this month to an average of
between 10 percent and 11 percent as food and oil prices
continue to move higher, Bangko Sentral ng Pilipinas
Governor Amando Tetangco Jr. said on Friday.
“It is
still possible for inflation to increase in the coming
months at a low double-digit level,” he told reporters.
He said
the uptrend after inflation averaged 6.86 percent in the
first five months, well above the forecast range of 7
percent to 9 percent.
The
central bank governor, however, stressed that food and
oil prices are likely to cool down as people start
penny-pinching what they have and companies improve
efficiencies and pare down overhead expenses.
“These
activities lead to moderation—that is, inflation could
still move up but at a more modest pace,” Tetangco said.
Growth
in other countries have turned sluggish as prices of
food and crude oil took the ramp up, forcing
corporations and individuals to adopt conservation
mechanisms.
Tetangco
said rice prices were beginning to stabilize and should
improve as another harvest season approaches.
Food
prices account for around 50 percent of the country’s
consumer price index but the price of the rice component
has gone up tremendously since the start of the year.
Tetangco
did not elaborate on how high inflation would likely
persist, other than saying the central bank is poised to
act “as and when required” over the 15- to 21-month
policy horizon.
The
central bank remains hopeful that inflation could still
coaxed toward the forecast range of 4 percent up to 6
percent next year—originally set at 2.5 percent to 4.5
percent, compared with this year’s original target of 3
percent to 5 percent.
The
situation prompted Tetangco and members of the seven-man
monetary board to explain to Malacañang how policy
measures failed to rein in inflation, which last year
averaged 2.8 percent.
Tetangco
reiterated the hawkish stance the central bank has taken
in recent months to control the rise in prices, vowing
at one point to “undertake further action” should this
be required.
He has
accepted the thought that part of the price increases
have not been due to loose domestic monetary policy but
to supply side pressures, mostly imported, as in the
case of oil.
While
accepting the notion that the economy can withstand
another monetary policy tightening, Tetangco said the
central bank stands ready to act should there be
evidence that current targets are under pressure.
As
things stand now, inflationary pressure seems manageable
for the central bank, according to Tetangco. |
