April inflation seen at 2.2-3.1%

Increases in the prices of consumer products were expected to have slowed down in April, given the decline in oil prices and the improvement in the production of certain food products.

This was according to the Bangko Sentral ng Pilipinas, which set its inflation forecast for April at  2.2 to 3.1 percent, slower than the 3.2 percent in March and the 3 percent in April last year.

“The forecast range reflects lower domestic oil prices as well as price reductions in selected food items, particularly in-season fruits and vegetables, cooking oil and sugar,” BSP Governor Amando Tetangco Jr. said Monday.

The forecast April inflation will bring the average for the first four months to a range of 3 to 3.2 percent.

The BSP has set its official inflation target for this year and  2014 at 3 to 5 percent.

“These factors (lower cost of oil and improved food supply) have offset the effects of the peso’s recent depreciation against the US dollar and the impact of the upward adjustment in electricity rates due to the increase in electricity demand during the summer season,” he said.

After breaking into the 40-to-$1 territory earlier this year, the peso slid back to the 41-to-$1 level this month due to uncertainties in the global economy that dampened the risk appetite of portfolio investors.

While it has its benefits, the depreciation of the peso makes imported goods more expensive, thereby causing upward pressure on domestic inflation.

The BSP said the inflation outlook remained favorable for this year and next year.

“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.

Given the favorable inflation outlook, the BSP on Thursday cut for the third time this year the interest rate on special deposit accounts (SDAs) from 2.5 to 2 percent.

The BSP said funds that might come out of its SDA facility was not expected to cause a faster-than-target inflation because of favorable demand and supply conditions.