Inflation was seen on Thursday to have moved lower in August and approach still closer to zero percent, according to the governor of the Bangko Sentral ng Pilipinas (BSP).
But BSP Governor Amando M. Tetangco Jr. indicated that an interest-rate cut was out of the question as the rate of change in prices was projected to range from 0.2 percent to 1 percent in August.
The forecast, Tetangco said, was based on sustained downward adjustments in electricity rates and falling oil prices. He quickly added that so-called base effects should also be at play.
In a statement, Tetangco reiterated there “may be no need” to adjust the monetary-policy settings, no matter that inflation has fallen consistently below the target the past three months.
“For next year, however, we see inflation moving up to within target. Given the rebound in the second-quarter GDP [gross domestic product] from the first quarter and the lags of monetary policy, there may be no need as yet to adjust policy,” Tetangco said.
What could change this stance? Tetangco said developments in oil prices, manifestations of the El Niño weather disturbance and financial-market volatilities are keenly watched “as part of the surveillance to see if there is a need to adjust the stance of policy.
In July inflation hit a record low of 0.8 percent, from 1.2 percent in June. Inflation had been moving progressively lower since April.
In the first seven months, inflation averaged 1.9 percent, a tad lower than the target for the year of 2 percent to
4 percent.
Should inflation in August hit the forecast low of 0.2 percent, the average rate in the first eight months was seen at 1.7 percent.
Should inflation in August average higher at 1 percent—or the ceiling of the governor’s forecast for the month—average inflation from January to August was seen at 1.8 percent. At the last rate-setting meeting of the Monetary Board, the BSP said inflation was seen averaging 1.8 percent for 2015, or lower than the target.