The average increase in consumer prices this month will not likely breach 2 percent—the low-end of the government’s target range for September—as the rates of key food and utility items remain subdued.
In his monthly forecast of inflation numbers, Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco, Jr. said on Monday September inflation could settle between 1.6 percent and 2.4 percent
“We observed lower power rates in Meralco [Manila Electric Co.]-serviced areas and lower domestic diesel and kerosene prices. In addition, prices of selected basic commodities are covered by the price freeze implemented by the DTI [Department of Trade and Industry],” Tetangco told reporters. His forecast could have been lower, if not for offsetting factors seen in the prices of select items in the consumer price index (CPI) basket.
“However, we also noted a slight price uptick in rice and higher domestic LPG [liquedfied Pertoleum Gas] prices along with the weaker peso, which could cause some upward price pressures,” Tetangco said. Inflation has been consistently below 2 percent since January. Tetangco said in the Monetary Board’s meeting last week that inflation is likely to settle below their target range for 2016 and rise toward the midpoint of the target range in 2017 and 2018.
In particular, BSP Deputy Governor Diwa C. Guinigundo said they have downgraded anew their inflation forecast for 2016 to 1.7 percent, from 1.8 percent.
The factors behind the lower-than-earlier-expected inflation average for the year include the lower actual August inflation rate, the slower economic activity in the third quarter of the year as election spending wanes and as rainy season sets in and some delays in the expected power rate adjustments.
For 2017 and 2018, the BSP’s expectations remain unchanged at 2.9 percent and 2.6 percent, respectively. In contrast, the BSP said overall balance of risks surrounding the inflation outlook is tilted to the upside next year—with pending petitions for adjustments along with the proposed adjustments in excise-tax rates of petroleum products and the potential second-round effects on transport fares.
With these inflation movements, Tetangco said the BSP can adjust policy rates if inflation trends should swings be strong and potentially disrupt economic stability. “The BSP stands ready to implement necessary policy actions to maintain price stability conducive to balanced and sustainable economic growth,” he said.