March inflation likely at 1.1%

Lower fuel and electricity costs likely pulled down inflation to 1.1 percent in March from 2.4 percent in the same month a year ago, although slightly faster than the four-month low of 0.9 percent last February, according to the Department of Finance’s chief economist.

“The relatively low inflation rate forecast comes with the lower electricity bill for the month and comparatively lower fuel prices. Meralco [Manila Electric Co.] rate for March is about 17-percent lower than that of the same month last year. Average diesel pump prices, while having bottomed out last January and having shown an upward trend since then, are still significantly lower than those of last year,” Finance Undersecretary Gil S. Beltran said in an economic bulletin.

Also, inflation, or the rate of increase in prices of the following commodities, declined year-on-year last month: food and non-alcoholic beverages, clothing and footwear, furnishings and household equipment, health and education.

Month-on-month, however, inflation for the following commodity groups inched up from January prices: food and non-alcoholic beverages, clothing and footwear, health, recreation and culture, and restaurants and miscellaneous services.

Last week, Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in a text message to reporters that the BSP expected inflation last March to settle within the 0.6-1.4 percent range.

“The downward adjustment in power rates and the recent appreciation of the peso could offset higher domestic oil prices during the month,” Tetangco explained.

While average inflation is still seen settling within the target range of 2-4 percent in the next two years, the Monetary Board—the BSP’s highest policy-making body—last week cut its inflation forecast for 2016 to 2.1 percent (from 2.2 percent previously) and for 2017 to 3.1 percent (from 3.2 percent).

BSP Deputy Governor Diwa C. Guinigundo had attributed the downward adjustments in their inflation forecasts to lower than projected February inflation, strengthening of the US dollar, delay in adjustment of power rates and reduction in transportation fares.