‘Yolanda’ seen to trigger spike in prices

Supertyphoon “Yolanda” may have a bigger and more prolonged effect on consumer prices than what was initially thought as the supply of food and other commodities is beginning to tighten reportedly due to the damage to farmlands. AFP FILE PHOTO

Supertyphoon “Yolanda” may have a bigger and more prolonged effect on consumer prices than what was initially thought as the supply of food and other commodities is beginning to tighten reportedly due to the damage to farmlands.

Monetary officials on Tuesday said that, based on their latest simulations, a sharp increase in consumer prices could take place before the end of the year. This may push 2013 inflation to an average of 3.2 percent from the year-to-date average of 2.8 percent as of October.

Initially, the Bangko Sentral ng Pilipinas (BSP) announced that the effects of Yolanda (international name: Haiyan) could lead to a temporary spike in prices. But now, senior officials expect average inflation for 2014 to reach 4.5 percent, from the previous forecast of 4 percent.

“That’s the staff’s initial assessment considering the effects of the disaster,” said BSP Deputy Governor Diwa C. Guinigundo, who heads the central bank’s monetary stability sector. “We will continue to monitor [prices] until the last Monetary Board meeting in December.”

If the simulations proved accurate, inflation for 2013 and 2014 could still be within the central bank’s target range of 3 to 5 percent.

In a separate statement, BSP Governor Amando M. Tetangco said the new unofficial forecasts for 2013 and 2014 were based on one of the simulated scenarios. He said the inflation forecasts for this year and the next would be firmed up at the next monetary policy meeting next month.

The BSP updates its inflation forecasts every six weeks to coincide with the Monetary Board’s meeting where it decides the key policy rates.

The central bank’s benchmark overnight borrowing and lending rates currently stand at record lows of 3.5 and 5.5 percent.

The BSP’s benchmark rates, along with other macroprudential tools, such as reserve requirements for banks and yields on special deposit accounts, help influence the lending behavior of banks and the amount of money circulating in the economy. This is part of its primary mandate to stabilize price movements.

After supertyphoon Yolanda hit the country last Nov. 8, Guinigundo said the effects of the typhoon on the country’s food supply would likely be minimal since the storm came toward the end of the harvest season.

However, those statements were made before government officials learned of the full extent of the typhoon’s damage.

According to official estimates, about 4,000 people were killed while three million more were displaced by the typhoon. About 224,000 homes were also destroyed.