THE PRIVATE SECTOR is confident that any increase in consumer prices this year and in 2010 will be benign—something monetary officials say will actually help temper inflation at least in the short term.

“Inflation outlook remains well anchored,” said Diwa Guinigundo, deputy governor at the Bangko Sentral ng Pilipinas (BSP).

The public’s inflation expectations affect the prices of commodities and services.

When inflation is perceived to be benign, consumers will tend to keep a normal purchasing behavior, Guinigundo said.

But if consumers think that prices would sharply rise in the coming months, they could purchase more goods and services at present to avoid paying for higher costs in the future.

The resulting increase in demand for goods and services, if it outpaces growth in supply, will lead to faster inflation.

According to the survey conducted by the BSP last September, results of which were released Friday, economists from the private sector expect that the increase in consumer prices, on the average, may settle at 3.2 percent this year and 4.8 percent next year.

The inflation projection by the private sector economists for this year is within the government’s official target of between 2.5 and 4.5 percent.

Similarly, the forecast for 2010 is consistent with the government’s official goal of keeping inflation within the range of 3.5 and 5.5 percent.

Guinigundo said the expectation that the rise in consumer prices would be moderate was brought about by the lingering effects of the global economic crisis on the Philippine economy. Although the crisis is said to be on the wane, global recovery may be gradual and any increase in demand for goods and services will be minimal.

“Moderate economic growth is expected to limit demand pressures and may temper any upside risks to inflation in 2009,” said the BSP in its latest “Inflation Report” where results of the survey were shown.

The economists covered by the survey said the appreciation of the peso would also help temper inflation. A stronger peso makes imported goods cheaper, thereby slowing down overall inflation.

Central bank officials said the recent appreciation of the peso was due to rising foreign exchange inflows arising from remittances and investments.

In the report, private sector economists covered by the BSP survey said the two recent calamities might lead to faster inflation in the fourth quarter of the year. Nonetheless, according to the survey, the increase would be small and would not breach the official inflation targets for this year and the next.

Guinigundo said the inflation projections of the BSP would be kept even after Tropical Storm “Ondoy” and Tropical Depression “Pepeng” disrupted vital agricultural supply lines.

The central bank official said the impact of the two calamities on prices of goods and services would be short-lived.