Inflation stays above 3% in March, says BSP

Inflation likely stayed above 3 percent in March on the back of higher electricity prices and a weak peso, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said Monday.

“The BSP forecast suggests that March inflation could settle within the 3-3.8 percent range. The higher power rates in Meralco-serviced areas due to the Malampaya maintenance shutdown along with the weaker peso could be partially offset by the decline in fuel and food prices this month,” Tetangco said in a text message to reporters.

The peso has slid to the 50:$1 level since mid-February.

In February, headline inflation rose 3.3 percent in February, a 27-month high, due to higher prices of both food and non-food products.

Last week, the BSP slightly lowered its inflation forecasts for this year and next year partly due to lower oil prices.

The Monetary Board, the BSP’s highest policymaking body, kept key interest rates unchanged during its meeting last Thursday, as Tetangco said the inflation outlook “remains manageable, consistent with favorable growth prospects.”

The policy rate hence stayed at 3 percent.

“While the average headline inflation for the first two months of 2017 has risen due to the recent increases in food and oil prices as well as base effects, latest forecasts are slightly lower than previous forecasts and within the target range of 2-4 percent for 2017-2018,” Tetangco said.

Inflation as of end-February averaged 3 percent, within the government’s target range of 2-4 percent.

But BSP Deputy Governor Diwa C. Guinigundo said the Monetary Board slightly brought down its inflation forecast for 2017 to 3.4 percent from 3.5 percent previously.

Guinigundo added that the 2018 forecast was also cut to 3 percent from 3.1 percent.

According to Guinigundo, one reason for the reduction in the 2017-2018 inflation forecasts was the downward trend in global and local oil prices as well as derivative products.

Tetangco said inflation expectations “remain anchored to the inflation target over the policy horizon.”

“Meanwhile, lingering uncertainty over the prospects of the global economy, due in part to possible shifts in macroeconomic policies in advanced economies, continues to pose a key downside risk to the inflation outlook,” Tetangco added.

“The Monetary Board also noted the beneficial effects on inflation of the removal of qualitative restrictions on rice importation. The Board emphasized that domestic economic activity is projected to stay firm, supported by buoyant household consumption and private investment, increased government spending, and ample credit and liquidity,” according to Tetangco.