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BSP places Sept. inflation at 3.8%-4.8%

Tetangco: PH on track to keeping annual rate below 5%
/ 09:36 PM September 26, 2011

The Philippine central bank expects annual inflation in September to be between 3.8 percent and 4.8 percent, Governor Amando Tetangco said on Monday, with the figures based on the old 2000 inflation data series.

In August, annual inflation was 4.3 percent, slower from July’s 4.6 percent based on the 2000 base year series.

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The index under the new data series with 2006 as the base year rose 4.7 percent, slowing from the previous month’s 5.1 percent.

Tetangco said the faster growth in prices of some food items and the price pressures created by the depreciation of the peso could have been offset by the benign movement in the costs of other commodities.

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He added that with September inflation seen settling between 3.8 and 4.8 percent, inflation this year could still fall below the official limit of 5 percent.

Should the central bank’s inflation forecast for September materialize, inflation for the first nine months of the year would average between 4.2 and 4.4 percent.

Latest data from the National Statistics Office showed that inflation averaged at 4.3 percent in January to August.

“Price of vegetables and canned goods, and the peso’s movements appear to be the dominant price factors this month [September],” Tetangco told reporters.

The peso, which was on a generally appreciating trend until this month, was dragged by dampened outlook of portfolio investors on the global economy. Their sentiment was driven by the economic and fiscal woes confronting US and Euro zone economies.

A weaker peso makes imported goods more expensive in local currency terms, thus pushes domestic inflation.

Financial market players said the depreciation of the peso, which is now back to the 43-to-a-dollar territory after earlier hovering in the 42 level, was consistent with the movement of currencies of other emerging Asian economies.

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Some foreign fund owners were pulling out capital, even those from better-performing emerging economies, and are holding on to dollars for safety amid an uncertain global economic picture.

Despite the additional price pressures from the weaker peso, the BSP said inflation is still expected to remain manageable throughout the year.

“Based on latest assessments, inflation expectations remain manageable over the policy horizon,” Tetangco said.

BSP said it would continue monitoring developments on the domestic and global fronts so that appropriate anti-inflation actions would be implemented immediately once price pressures become more significant.

“We [BSP] are watchful of global developments that may affect aggregate global demand, capital flows, and prices of international commodities,” Tetangco said.—With a report from Reuters

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TAGS: forecasts, Inflation, Philippine inflation, Philippines
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