Rate of rise in prices seen to remain modest

The Bangko Sentral ng Pilipinas said the overall rate of rise in consumer prices would likely remain modest in February as favorable harvest of selected food items helped temper the impact of an increase in oil prices.

Based on its estimates, the BSP expects inflation to settle between 2.8 and 3.7 percent in February. These figures in turn would bring inflation in the first two months of the year to an average range of between 2.9 and 3.4 percent.

In the same two-month period of 2012, inflation stood at 3.3 percent.

Inflation in January was recorded at 3 percent.

Monetary officials consider these figures to be manageable.

BSP Governor Amando Tetangco Jr. on Tuesday said that favorable price movements during the month helped in taming inflation.

“Results of the BSP’s latest forecasting exercises suggest that average inflation for 2013 and 2014 could still settle at the lower half of the government-set target, reflecting continued manageable inflation pressures and well-anchored inflation expectations,” Tetangco said in a text message to reporters.

According to Tetangco, favorable farm supply of fruits, sugar, and cooking oil, as well as the decline in the prices of electricity have provided downward pressures on overall inflation during the month. These pressures had offset the impact of the increase in oil prices on inflation.

The projections that inflation will remain manageable come with forecasts that the economy will continue to post a robust growth this year.

The central bank said that the Philippines would remain in a sweet spot that could attract more foreign investors.

“Moving forward, the BSP will continue to monitor price and demand developments to ensure that monetary policy settings remain appropriate and supportive of the BSP’s primary mandate of delivering price stability conducive to a balanced and sustainable economic growth,” Tetangco said.

In the last policy meeting of the central bank’s Monetary Board in January, monetary officials decided to keep key rates at record lows.

An increase in interest rates would help temper inflation. But the BSP said it did not see an urgent need to raise the key rates given projections that the supply of goods and services would remain sufficient to meet growing demand.

Consequently, officials said, price increases over the short term will likely remain tempered.

Nonetheless, Tetangco said, the central bank is prepared to make any adjustments in the policy rates should price pressures become significant.

Currently, the BSP’s key policy rates stand at 3.5 percent for overnight borrowing, and 5.5 percent for overnight lending.