Inflation slowed to 2.5% in July

Low rate gives BSP room to adjust policies

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BSP Governor Amando Tetangco Jr.  INQUIRER FILE PHOTO

The rise in consumer prices slowed to a near four-year low last July amid steady energy prices and the modest rise in food costs, government data released Tuesday showed.

 

The central bank hinted at further adjustments in its monetary policies, citing the slower-than-expected rate in price increases provided space for accommodative policies that would counter the possible effects of weak global economic conditions on the Philippines.

 

Inflation for July was 2.5 percent, the lowest since September 2009. Although this was within the Bangko Sentral ng Pilipinas’ (BSP) forecast of 2.2 – 3.1 percent for the month, July’s low inflation brought the year-to-date average to 2.9 percent. This was also lower than the BSP’s full-year target of 3-5 percent. Inflation for June was also adjusted to 2.7 percent from the previous 2.8 percent.

 

“This provides the BSP room to make any further adjustments to policy stance, if needed, to address possible effects of changes in the growth trajectory of our main trading partners, including the US, Japan and China,” BSP Governor Amando M. Tetangco Jr. said.

 

He added that “shifts in investor sentiment” away from emerging markets like the Philippines could weaken the peso further, making imported products such as fuel more expensive.

 

He said the BSP still expected inflation for the year to fall within the target range, adding that the deceleration reinforced the forecast that price increases would not pose problems for the economy in the coming months.

 

“The comments by the [BSP] governor suggest that the central bank feels confident about possible maneuvers to support the economy and counter uncertainty in the external environment,” HSBC said in a separate comment, following the release of inflation numbers.

 

HSBC cited the deceleration in the expansion of bank lending and remittance flows from migrant Filipino workers as possible risks to the country’s growth. Economic conditions abroad, particularly in China, which is expected to grow slower than the Philippines this year, are potential drags on the local economy, it said.

 

“Even with the global environment likely to improve in the fourth quarter, the BSP will not take any chances and do what it can in the meantime to support spending,” the London-based bank said.

 

 

 

 

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  • parefrank

    I just wonder where these people are shopping. When we go, we have a standard list for every week and when we compare the amount to pay, we are very above that famous 2.5%. Not even caring that always there are more goods at the same or only little higher price, but with less content. Our bill last week was, for the same goods and foods, 11% highr than first week of January and 16% higher than last week of November. And we are not in expensive Manila. Plus, maany goods just hanfe the name and are more expensive than before..

  • eight_log

    KEEP LOAN INTERESTS LOW … this will spawn loans and will lessen the banks and govt money holdings. Money in banks and govt hands is a much bigger driver of inflation!!!!

    The rising prices in the Philippines is a very good measure … an anti-inflationary measure. Price increases drive consumption lower and effectively increases supply … inflation is lessened!!!!

    • http://www.personalfinanceapprentice.com/ Carlos PFA

      Uhm… I can’t tell if you;re serious or sarcastic…

      • eight_log

        I am serious!!!! Only you guys there in BSP can cause inflation!!! You are adept at covering at inflationary policies or creating such policies … policies like price controls … which in reality increase prices. Unabated price increases cannot occur without those stupid govt policies that result to artificially increase demand and or reduce supplies coupled with increasing money supply.

        If inflation is low … that means … you are doing right by not doing anything!!!!

      • http://www.personalfinanceapprentice.com/ Carlos PFA

        no gov. intervention = supply and demand reach an equilibrium on their own (balancing each other out)

        gov intervention (price controls, and…?) cause abnormal reactions to supply and demand = price rise and or cause some other un-intended consequence (like black markets)

        That’s true, specially for price controls.

        But I’m not sure BSP or government action is the sole reason for inflation.

      • eight_log

        Mostly … politicians in panic mode trying to please the people … and government economists in high regulatory positions provide the glib cover for inflationary policies … those govt policies that increase demand without increasing supply (oil) or that restrict supply or decrease in productivity (rice) are inflationary.

        These policies are the very reasons for rising prices, low purchasing power, slow or non existing growth, stagnant capitalization or under capitalization etc etc etc!!!

      • Tommy

        No. Just no.

        The idea that only the BSP causes inflation is absolutely ridiculous for dozens of reasons.

        Here’s the obvious one: oil. Oil prices affect gas and electricity costs, which affect the prices of most goods. I should not have to point out that the Philippines (or the BSP) does not control the global oil price.

        So oil price goes up = inflation.

        So nope. Just no.

      • eight_log

        Price increases tend to increase supply and decrease demand … looking at it, it diminishes the pressure on the prices to go up. Doesn’t this strike you then that price increases are deflationary rather than inflationary?

        What is inflationary to me is when the government expands the money supply, policies that restraints international or domestic commerce, controls on prices and profits … Policies which bring about the situation wherein there is increase in demand without relationship to supply and that which reduces supply without immediate relationship to demand.

        Who makes these stupid policies???

      • Tommy

        ‘Doesn’t this strike you then that price increases are deflationary rather than inflationary?’

        I do not think you understand what inflation is.

      • eight_log

        Pls have a look at a reply from Carlos below … it makes sense … no?

        If we think of inflation in terms of the current rate of price increase alone would be simplistic. .There are other stronger factors that drive inflation

        The govt will not want a high inflation rate … so many things are indexed to it that will require big budgetary allocations.etc etc … policies made by the govt to mitigate increasing prices, to cater to their vested interests or to counter induced economic flaws by private companies/individuals are, more often than not, strong inflationary forces!!!

      • Tommy

        It’s about right, but ‘abnormal reactions to supply and demand’ often serve the public good.

        But again, I do not think you understand what inflation is.

      • eight_log

        I am not an economist … lol … educate me pls … what is inflation in a layman’s language. Pls enumerate the factors you consider or included in your formula… to arrive at your understanding of what inflation is … I will truly appreciate it!!!

      • Tommy

        From Wikipedia: ‘In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.’

        Which means your statement: ”Doesn’t this strike you then that price increases are deflationary rather than inflationary?” makes no sense. Price increases are EXACTLY what inflation is, and you’re arguing that they’re the opposite.

      • eight_log

        I am with you in that … inflation is all about price increase .. the question, however, is what causes the price to increase? The reason why I said that price increases are deflationary rather than inflationary is because when prices go up it will bring about reduced demand for goods … this in turn will increase in supply consequently bringing the prices down.

        How the government (BSP) responds to the “temporary” price increase more often pushes inflation higher!!!

        Looking at your oil … yes, the govt where it stands now has no control over its price. But for sure the govt has many tools up his sleeves to counter the increase the price of oil. Other countries have done it … look at Thailand. Another thing, Privatization has been and is the biggest driver of inflation!!!!

      • Tommy

        ‘How the government (BSP) responds to the “temporary” price increase more often pushes inflation higher!!!’

        No, no it really doesn’t. Given that you’ve admitted you’re not very knowledgeable about economics, why exactly do you think you know better than the BSP how economics works?

      • eight_log

        Yes, I am not denying the fact that i am not as knowledgeable as BSP, my knowledge in economics is based on what I see in the streets and hear from barbershops… I can feel the effect of what the govt isdoing … and, therefore, I make my own analysis … I am sure for a fact that price statistics/analysis covers just a part of the problem and most probably the coverage is inaccurate.

        Can you blame me if I say that the measurement of inflation are almost always inaccurate … the GOVERNMENT (BSP) … THE POLITICIANS … have a vested interest in the inaccuracies!!!

      • Tommy

        No offense, but barbers and street vendors aren’t exactly economics PhDs.

        It’s true that when you adjust things like interest rates other factors are affected. It’s true that when you adjust prices demand is affected. If these are that evident to the man on the street, do you not think the BSP would be aware of these factors, and that they wouldn’t take this into account? I mean, I was an econ major in college, and this is very basic macroeconomics.

        And their measures might be politically motivated, but inflation in general is based off the market value of goods, and it´s not exactly easy to fake that. If you don’t like the government measure, look for other ones, like those of the World Bank.

      • eight_log

        I am learning from you … thanks!!!!

        “but inflation in general is based off the market value of goods” …I think that is where the problem comes from. Too much emphasis is given on the market value of good … the root cause as to why prices increased are being ignored it seems. Factors that cannot be expressed in an equation and all other economic concepts that cannot be mathematically measured or weighted are ignored until those factors cause price increases that can be measured.

      • Tommy

        There really aren’t many factors that can’t be accounted for in economic equations, to be honest. Even things like risk or instability can be accounted for to some extent.

        But in general, yes, inflation ignores the root causes of price increases. The BSP’s mission, in general, is to keep inflation to a manageable level. It focuses on that. Things like the price of rice, for instance, are the responsibility of other departments. Hopefully they’re at least cooperating.

      • eight_log

        This is very enlightening … thank you so much!!!!

        I suggest, therefore, that BSP GET INVOLVED … you know better much better than those people from DOE, DA etc. at setting pricing policies etc!!!

        The economy is like an abstract painting … anyone can have his/her interpretation. Since BSP is the mainstay artist … why not advise those other agencies that contribute to the painting where to point the lines and what color to project if only to make the painting more logical and easy to interpret by people like me!?

        Again THANK YOU AND MORE POWER TO YOU!!!

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