BSP: 2013 inflation may fall within target

Inflation in December may have registered its fastest rate in two years because of higher power and food prices, the Bangko Sentral ng Pilipinas (BSP) said.

Despite the expected spike, the average rate of rise in consumer prices for the year is still expected to settle within, or even slightly below, the BSP’s target range for the year, justifying the regulator’s key policy settings.

Inflation in December may accelerate to 3.8 percent to 4.7 percent, BSP Governor Amando M. Tetangco Jr. yesterday said.

If the top end of the projected range were to be reached, inflation would have posted its fastest clip since December 2011. If it hit the low end, the rate would be the highest since September 2012.

Last November, consumer prices rose by an average of 3.3 percent. This brought the year-to-date average to 2.8 percent.

Tetangco said the spike in December would be driven mainly by higher electricity rates that had been approved this month. He also noted “lingering price pressures” on some food commodities as a result of the destruction wreaked by Supertyphoon “Yolanda” last November 8.

“Going forward, the BSP will remain vigilant in monitoring price pressures to ensure price stability conducive to a balanced and sustainable economic growth,” the BSP said.

The BSP encourages economic growth and financial stability by crafting its monetary policy based on the movement of consumer prices. At its last policy meeting, the BSP said inflation could average 2.9 percent in 2013, despite the effects of the supertyphoon. Higher power rates were also considered in the forecast.

The 2013 projection is slightly below the BSP’s target range of 3 to 5 percent. With consumer prices expected to remain stable, the BSP this month kept key overnight borrowing and lending rates at their record lows of 3.5 and 5.5 percent, respectively.

Next year, inflation may accelerate to 4.5 percent, or still within the BSP’s target range.