Decelerated inflation that has fallen below the target for 14 months in a series already could finally push past the 2-percent low end of the target range in the July price survey, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.
According to BSP Governor Amando Tetangco Jr., consumer goods prices may have accelerated to within target range in July as a result of adjustments in electricity rates and in food prices.
He told reporters on Tuesday inflation likely ranged from a low of 1.5 percent to a high of 2.4 percent in July, which is an indication that services and goods prices finally picked up pace enough to pull inflation past the 2-percent threshold.
The forecast inflation Tetangco gave for July is the same forecast he gave for the month of June when inflation hit a 14-month high of 1.9 percent on higher food and beverage prices. The central bank governor said the upside inflation pressures come from the upward adjustment in power rates in Meralco-serviced areas and higher rice prices along with the weaker peso.
The accelerated forecast inflation, however, could be offset in part by lower water rates, the reduction in domestic oil prices and a decline in vegetable prices during the survey month.
Headline inflation consistently fell off the target since May last year and somewhat embarrassed policymakers in both the fiscal and monetary sectors whose technocrats anticipated inflation to range from 2 percent up to 4 percent this year.
Prior to this episode, the BSP successfully anticipated the path inflation took the past six years.
In 2015, for instance, the BSP inaccurately forecasted inflation which averaged 1.4 percent that year, or below the government target of 2 percent to 4 percent.
The June inflation print pushed the average inflation to only 1.3 in the first half of the year, still below target. This means that for inflation to graze the low end of the government’s 2 to 4 target range for the year, the average inflation in the second half must be around 2.7 percent.
Tetangco refused to drop hints in his inflation forecast statement, but vowed to monitor developments affecting the stability of prices in the country.
“Going forward, the BSP will remain watchful of evolving price trends to ensure price stability conducive to a balanced and sustainable economic growth,” Tetangco said.
Analysts said the July inflation rate would finally hit the low-end of the government target.
Ateneo de Manila University economist Fernando Aldaba said inflation in July could fall within the 2 to 2.5 percent range while University of Asia and the Pacific economist Victor A. Abola said it could settle at 2 percent.
“For the second half of the year, inflation could be close to 2 percent crude oil prices remain soft and there is no more election spending,” Abola said.
Aldaba said inflation in the July to December period could breach the 2-percent mark, especially during the fourth quarter, when demand usually picks up.
(With a report from Cai U. Ordinario)