The inflation rate in November is expected to remain benign, as the appreciation of the peso against the dollar helped temper the rise in the cost of oil and other imported goods.
This was according to the Bangko Sentral ng Pilipinas, which is projecting an inflation rate of between 2.7 percent and 3.6 percent. Monetary authorities consider this range manageable.
“Supply conditions remained favorable, while demand continued to be robust. Oil prices were broadly stable, while the peso’s relative firmness helped support price stability,” BSP Governor Amando Tetangco Jr. told reporters.
Should the central bank’s inflation estimate for November materialize, the average increase in consumer prices for the first 11 months of the year should be between 3.1 percent and 3.2 percent.
In January to October, inflation averaged 3.2 percent.
The government is targeting a full-year inflation rate of between 3 and 5 percent for this year and the next two years.
The peso has been one of the strongest-performing Asian currencies so far this year, appreciating by more than 6 percent since January. It is now nearing the 40-to-a-dollar territory compared to the 43-to-$1 level at the start of the year.
The strengthening of the peso had helped temper the rise in the local prices of goods and services.
Certain sectors, however, have complained about the peso appreciation. Exporters said a strong peso made Philippine-made goods more expensive in dollar terms, rendering them less competitive in the world market. Overseas Filipino workers are also adversely affected by the peso’s strengthening, as this results in the shrinking of the peso value of the dollars they send to their families back home.
Given this backdrop, the BSP has been asked to intervene in the foreign exchange market to deliberately weaken the peso’s value against the US dollar. The central bank, however, said it could not be biased in favor of a strong or weak peso, noting that exchange rate movements affect various sectors differently.
In the meantime, the BSP said projections that inflation would remain benign until 2014 indicated that the existing monetary policy remained appropriate.
The BSP has kept its policy rates at record lows of 3.5 and 5.5 percent for overnight borrowing and lending, respectively.
“Our current policy stance remains consistent with prevailing monetary and price conditions,” Tetangco said.
He added, however, that the BSP was willing to immediately adjust existing monetary policies should need arise.
“We will continue to be watchful of any emergent risks that could alter the inflation outlook and expectations, and calibrate monetary policy as warranted,” Tetangco said.