August inflation seen at 1.9-2.7%

The rise in consumer prices likely remained subdued in August, providing room for monetary authorities to sustain a stimulus program and encourage economic growth.

However, the Bangko Sentral ng Pilipinas (BSP) said it was mindful of price pressures that may push inflation higher and potentially choke the economy in the coming months.

BSP Governor Amando M. Tetangco Jr. said inflation in August would likely be between 1.9 percent and 2.7 percent.

This would be slower than the 2.8 percent average rise in consumer prices in July, and lower than the year-to-date average of 2.9 percent at the end of last month.

“August inflation is expected to remain benign… despite the recent weather disturbances, peso weakness, and uptick in petro prices,” Tetangco told reporters Thursday.

Weather disturbances usually lead to tightness in supply of food products, especially if food-producing areas of the country are affected by floods. A weaker peso, meanwhile, makes imported products such as fuel more expensive.

Tetangco said the reduction in power rates for the month may have tempered price increases of other goods.

He had said he was confident that inflation this year would still settle within the BSP’s target of 3 to 5 percent, implying an expected acceleration in the coming months.

Despite the expected low inflation in August, Tetangco said the BSP would continue to track developments that could push prices higher and adjust monetary settings accordingly.

This month, Standard & Poor’s warned of a possible increase in borrowing costs across Asia as foreign investors pull out of emerging markets and return to the US. This comes amid the expected tapering of the Federal Reserve’s monthly bond-buying program that started in 2009 to keep interest rates in the US down with the aim of spurring economic growth.