BSP sees inflation at 2.8-3.6% in September

A weaker peso and the increase in the prices of rice, oil and power likely raised inflation to 2.8-3.6 percent in September, the Bangko Sentral ng Pilipinas (BSP) said Friday.

Citing the forecast of its Department of Economic Research, the BSP said in a statement the projected range for the month would still allow average inflation for the entire year to remain within the government’s target of 2-4 percent.

In September, “higher prices of domestic petroleum and rice along with the increase in electricity rates in Meralco-serviced areas and a more depreciated peso were seen to contribute to upward price pressures,” the BSP said.

The peso remained at 11-year lows in September, trading at the 51:$1 level.

In August, inflation rose 3.1 percent, the fastest in three months, also on higher food, fuel and power prices coupled with a weaker peso.

Last week, the Monetary Board kept the policy rate or overnight reverse repurchase facility at 3 percent, while also maintaining the rates for overnight lending and deposit facilities.

The Monetary Board, the BSP’s highest policymaking body, had also left the reserve requirement ratios unchanged, as it deemed that “the inflation environment remains manageable” such that the rate of increase in prices of basic goods was seen settling within the government target range in the next three years.

“The balance of risks to the inflation outlook also continues to be on the upside. While the proposed tax reform program may exert potential transitory pressures on prices, various social safety nets and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term,” BSP Governor Nestor A. Espenilla Jr. had said.

The proposed first package of the Duterte administration’s comprehensive tax reform program aimed at reducing personal income tax rates while jacking up taxes on consumption will be up for discussion at the Senate plenary starting next week. The government is eyeing its implementation early next year.