BSP expects March inflation rate to stay within target range

The Bangko Sentral ng Pilipinas said consumer prices were seen to have kept a modest rate of increase in March, given a favorable food supply and lower domestic oil prices.

The BSP expects the inflation rate in March to range from 2.8 to 3.7 percent, which is well within the official target range for the full year of 3 to 5 percent.

BSP Governor Amando Tetangco Jr. said the rise in the prices of consumer goods in March was triggered by the increase in electricity rates. The full impact of the electricity rate hike on inflation was minimize the relatively lower prices of food and oil.

“Inflation continues to be low and favorable,” Tetangco said in a text message to reporters.

“The forecast range incorporates the impact of the upward adjustment in electricity rates due to the increase in stranded costs during the month. It also takes into account the lower domestic oil prices as well as price reductions in selected food items, particularly in-season fruits, vegetables and sugar,” he added.

The National Statistics Office earlier reported that inflation averaged 3.2 percent in the first two months of the year.

The BSP’s forecast for March would bring the first-quarter average to a range of 3.1 to 3.4 percent.

Tetangco said the outlook for the rest of the year and for 2014 on price movements remained encouraging. He said consumer prices were still expected to average below 4 percent this year and next year.

Despite this, he said the BSP continued  closely monitoring factors that might effect domestic prices. The BSP is ready to implement measures that will help temper inflation should price pressures become significant enough to result in th e breaching of the inflation target.

“Moving forward, the BSP will continue to monitor price and demand developments to ensure sustained support to the BSP’s primary mandate of delivering price stability conducive to a balanced and sustainable economic growth,” Tetangco said.

The BSP said the benign inflation environment in the country would help efforts to encourage the entry of foreign direct investments to the country. Modest inflation is credited for keeping cost of capital stable and for avoiding a significant deterioration in the purchasing power of consumers.

Last year, inflation averaged 3.2 percent.

The appreciation of the peso was one of the factors credited for helping keep inflation modest last year. The strengthening of the peso is said to have tempered the increase in the cost of imports, easing the increase in overall domestic prices.