BSP sees moderate rate of rise in consumer prices

MANILA, Philippines—The acceleration in the rate of rise in consumer prices may be moderated in the coming months due to legal issues that have resulted in further delays in the implementation of power rate hikes in Metro Manila.

Even if Manila Power Co. (Meralco) were to secure the Supreme Court’s nod to raise rates, the effects on consumer price inflation would be muted, depending on the schedule and magnitude of adjustments, a BSP official said.

“If it’s another 60 days, then it may go down further,” said Diwa C. Guinigundo, Bangko Sentral ng Pilipinas (BSP) deputy governor, referring to consumer price inflation.

During its last monetary policy meeting, the BSP said Meralco’s rate hike in Metro Manila would add 15 basis points to the inflation figure of 2014, and 7 basis points to that of next year. Without the rate hike, the BSP expects inflation to accelerate to 4.3 percent in 2014 from 3 percent last year. In 2015, inflation is expected to decelerate to 3.2 percent. All forecasts are within the BSP’s target range of 3 to 5 percent for 2014, and 2 to 4 percent for 2015.

Last December, Meralco said it would have to increase power rates by P4.15 a kiloWatt-hour after it was forced to buy more electricity from the Wholesale Electricity Spot Market and liquid fuel-powered plants. This was brought on by the maintenance shutdown of the Malampaya natural gas facility. The situation also was aggravated by the temporary shutdown of smaller plants.

The high court issued a temporary injunction to stop the rate hikes following lawsuits filed by several groups, such as party-list Bagong Alyansang Makabayan (Bayan), accusing power companies of profiteering. The injunction was extended by another 60 days, or until April 22.

The effect of the rate hike on overall consumer prices is still uncertain, Guinigundo said.