By Bianca Cuaresma
The Department of Finance (DOF) ruled out on Tuesday any sudden spike in inflation, its path likely remaining subdued throughout the year as global energy price prospects remain muted.
In its most recent bulletin, the DOF said this year’s inflation trajectory should not unduly ramp up despite having already proven substantially lower than the target last year.
In 2015 inflation averaged only 1.4 percent, or lower than the 2-percent floor, as energy prices tanked on the basis of oversupply and on weakened global demand.
The Bangko Sentral ng Pilipinas (BSP) projected inflation no higher than 4 percent.
“Prospects for the year point toward subdued price increases due to developments in the international market. International energy prices are expected to remain depressed this year,” Finance Undersecretary Gil Beltran said.
“Further decline in coal prices should translate into lower electricity costs. Much of the country’s electricity generation is from coal plants. Generation charge accounts for nearly half of a typical electricity bill,”
he continued.
Likewise, despite the El Niño disturbance seen to wreak havoc on the agricultural output, food prices were neverthless seen to remain steady for the year.
“Despite the ongoing dry spell, international food prices are not expected to spike. Indeed, forecast by the World Bank point toward a decrease in international rice price this year. A shortfall in domestic rice production may be compensated for by imports,” Beltran said. The central bank earlier said they expect inflation to crawl back to target range of 2 percent to 4 percent this year and in 2017.
The Philippine Statistics Authority (PSA) said on Friday inflation averaged 1.3 percent in January, a reversal from the acceleration in the final two months of 2015.
“The slower inflation outturn was primarily due to lower utility rates and transport prices among others,” BSP Governor Amando M. Tetangco Jr. said.
With inflation low, the BSP was seen not likely upsetting its policy infrastructure when the seven-man Monetary Board meets on Thursday. This will be the first rate-setting meeting of the Monetary Board.
Tetangco said upside risks continue to come from stronger-than-expected El Niño weather disruptions and adjustments in electricity rates given pending petitions.
At present, the central bank lends to banks at 6 percent but borrows from them at only 4 percent. Its anti-liquidity special deposit account rate remains at 2.5 percent.