Inflation seen at its slowest in 5 years

THE AVERAGE rate of rise in consumer price may have been the slowest in more than five years as oil remains cheap while food costs are stable, monetary authorities said this week.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said January inflation could have dipped further, while projections showed prices would remain stable in the coming months.

“Latest runs show domestic inflation over the policy horizon will be well within the target range [of 2 to 4 percent],” Tetangco said in a statement Wednesday.

For January, the BSP expects consumer price increases to average between 1.8 and 2.7 percent against December’s 2.7 percent. At the low end of the projected range, inflation would be at its slowest since the 1.7 percent seen in August 2009.

BSP officials earlier said that stable inflation would allow them to keep policy rates at their near-record lows, giving the Philippine economy more room to breathe.

Inflation data for January will be released next week.

The central bank’s main goal is the protection of consumer’s purchasing power by keeping prices stable. This is done by adjusting interest rates and controlling the amount of money circulating in the economy.

While growth is a secondary concern, the policymaking Monetary Board also considers the economy’s performance when making adjustments that affect interest rates and the nation’s money supply.

“The BSP will watch economic and financial developments, including the balance of global liquidity, its impact on global inflation and growth dynamics, and how these would translate to investment sentiment, financial market moves and domestic inflation expectations,” Tetangco said.

His statements came ahead of the release of fourth quarter gross domestic product (GDP) data for the Philippines later this week. Most expect the economy to rise faster than the 5.3-percent expansion recorded in the July-September period, although the 6.5-percent full-year growth target may be out of reach.

Policy adjustments in advanced economies, which could affect the flow of investments in and out of the Philippines, are also being closely watched, BSP officials said.

This month, both the European Central Bank and the Bank of Japan, in a bid to prop up their faltering economies, have announced separate quantitative easing measures, promising to infuse fresh cash into global markets.

In contrast, the US Federal Reserve is widely expected to start hiking interest rates in the coming months after keeping them at near zero for the past five years.