MANILA, Philippines–The rate of increase in the prices of basic goods slightly rose in February to 2.5 percent, mainly due to higher utility rates.
A Philippine Statistics Authority report released Thursday showed that last month’s headline inflation rate inched up from January’s 2.4 percent. Also, the February figure was lower than the 4.1 percent posted in the same month last year.
The year-to-date inflation level is 2.4 percent—well within the government’s 2014 full-year target of 2-4 percent.
Given the inflation figure for February, key interest rates would likely stay on hold for now as monetary authorities keep an eye out for sudden shifts in fuel prices and investor sentiment.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said inflation in the coming months would stay manageable and, for the moment, monetary settings were “appropriate.”
“The BSP appears comfortable with its current policy stance. Although low inflation is leaving room to keep policy on hold, growth remains robust,” Barclays bank economist Rahul Bajoria said in a note on Thursday.
“We continue to watch global developments, including possible strong reversals in oil price trends and changes in investor sentiment, which could create market volatilities and affect inflation expectations,” Tetangco told reporters in a statement.
In a statement, the National Economic and Development Authority (Neda) attributed the higher inflation in February to the rise in utility costs as well as an uptick in the prices of gasoline, which had offset the slower food price hikes.
“The recent increase in oil prices was the result of cutbacks in the production and exploration of international energy firms, triggered by soft oil prices. The outlook for prices in the medium term, however, remains modest given a backdrop of strong world crude oil supply growth and weak global demand,” said Socioeconomic Planning Secretary Arsenio M. Balisacan, who is also director-general of the Neda.
In February, power distributor Manila Electric Co. raised electricity rates by 5.4 percent year-on-year, or by P0.30 per kilowatt hour, on the back of higher generation and transmission charges brought on by lower availability of power plants last January, Balisacan noted.
The Neda chief also pointed out that the higher fares imposed on Light Rail Transit and Metro Rail Transit riders jacked up the rate of rise in the cost of transport services to 3.3 percent last month from the previous month’s 1.5 percent.
As for food prices, Balisacan said the rate of increase slowed last month to 4.9 percent from 5.6 percent in January due to “softer” hikes in meat, rice and vegetable prices. In particular, rice prices eased last February because of lower farmgate prices as well as stable supply.
“The favorable outlook on the production of agricultural commodities, particularly palay and corn, should further ease local price pressures in the coming months,” Balisacan said.
The Neda chief added that the “moderate” inflation in February came on the back of a “normalizing” supply chain, as well as the “relatively stable” peso during the first two months.
“There were no new major economic shocks, such as adverse weather conditions. The supply chain also normalized, partly due to the easing of port congestion. The peso likewise remained relatively stable due to the country’s strong external position,” he explained.
Balisacan nonetheless warned that a prolonged dry season due to the El Niño weather disturbance “poses risk of inflation within the immediate term.”