BSP expects tempered rate of rise in PH prices

The Bangko Sentral ng Pilipinas said the rate of rise in consumer prices would likely remain modest this year and in 2014 due to expectations that the peso would stay relatively firm against the US dollar.

The BSP sees inflation to fall below 4 percent this year and the next.

In a briefing Friday, BSP Assistant Governor Ma. Cyd Tuaño-Amador said the inflation target for this year and the next would not be breached.

“Inflation will continue to be within the 3- to 5-percent target range, with the balance of risks [of having the actual inflation rates lower or higher than the target] seen to be broadly even,” Amador said.

Factors that may cause inflation to accelerate include an increase in electricity prices and surge in foreign capital flows that may boost overall domestic liquidity, she explained.

On the other hand, Amador said, lingering challenges confronting advanced economies may help dampen global demand. In turn, the increase in the prices of imported goods may be tempered, thereby easing pressures on domestic price as well.

Amador also said ample supply of domestically produced and imported rice is expected to help tame inflation.

Zeno Abenoja, a director at the BSP’s economic research department, said in the same briefing that projections of a relatively firm peso could help temper inflation.

“Average inflation will continue to hover in the lower half of the target range for 2013 and 2014. [Firmness of] the peso may help temper prices of imported commodities,” Abenoja said.

In 2012, the peso appreciated by nearly 7 percent against the US dollar, closing at 41.05 on the last trading day of the year.

Since then, the peso has strengthened further and now hovers in the 40-to-a-dollar territory.

The BSP expects the peso to move within a relatively tight range and stay close to its current level, Amador said.

The National Statistics Office earlier reported that inflation in January settled at 3 percent.

The rise of the peso last year was credited to substantial dollar inflows in the form of remittance and foreign portfolio investments.

The Philippines and other emerging markets have been attracting foreign portfolio investors due to their favorable economic growth rates compared with those of industrialized countries.

Meantime, Abenoja said, the BSP considers its existing policy rate to be appropriate.

The central bank sees the economy to continue growing robustly this year while inflation remains benign, he said.

“Inflation outlook continues to be benign and domestic economic activity is robust and continues to build momentum,” Abenoja said.

Economic growth for this year is expected to be sustained anew by higher government spending, private investments, and household consumption.