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THE
country’s dollar hoard, or the gross international
reserves, is just a shade under $28 billion at end-July,
having fattened by some $1.5 billion in just one month.
Normally
a purely positive development, the continued expansion
of the country’s foreign-exchange reserves has forced
the Bangko Sentral ng Pilipinas to train a sharper eye
on inflation, as the National Statistics Office reported
an upswing in July to 2.6 percent from only 2.3 percent
in June.
Regulators extract advance indications as to where
inflation would likely be down the line by peeking
closely at core inflation, which excludes so- called
volatile food and energy items from the consumer price
index.
Rising
core inflation suggests that headline inflation may
already be under pressure to move up.
The
renewed focus on inflation and threats to it are the
reverse of monetary activities six or seven months
earlier when domestic liquidity growth was starting to
peak. Domestic liquidity growth, or M3, at that time was
fed by strong foreign inflows in volumes far too high
than even the high end of the estimated nominal growth
rate of 12 percent at that time.
The BSP
feared the rising liquidity in the system would kick up
inflation unless adequately addressed by the
policymaking monetary board.
The
monetary board could raise its policy rates to rein in
liquidity growth and inflation, but could dampen the
growth potential if the delicate balancing act was far
too favorable for one or the other.
But
while core inflation is acting up, BSP Governor Amando
M. Tetangco Jr. said the indicators continue to show
“manageable inflation pressures for the rest of the
year.”
“The
increase in demand remains moderate and the strong peso
is seen to temper price pressures in the near term,” he
said.
Tetangco
pointed out the July inflation was lower than the
6.4-percent inflation reported a year earlier, although
this was also slightly higher than the 1.8-percent to
2.5-percent forecast for the period.
“Risks
to inflation remain. The continued volatility in oil
prices, possible unfavorable weather conditions, recent
wage adjustments, the approved hike in transport fees
and the possibility of sustained high domestic liquidity
could generate higher risks to the inflation outlook,”
Tetangco said.
He
acknowledged the $27.9-billion GIR in July already
exceeded the forecast dollar reserves of only $26.6
billion by $1.3 billion.
A
sizeable portion of the increase in dollar reserves was
on account of continued foreign exchange inflows and BSP
receipts of investment income from abroad.
As a
result, the reserves now cover 5.1 months of imports of
goods and the payment of services and income.
They
also equal 5.4 times the country’s short-term external
debt based on original maturity and three times based on
residual maturity. |
