Fuel, electricity, rice prices to push August inflation higher

Prices of goods and services in the domestic economy are expected to have risen at a faster clip in August, due mainly to the rising cost of petroleum products as well as the increase in electricity rates in areas served by Meralco, the country’s largest power retailer.

In a statement, the Bangko Sentral ng Pilipinas’ Department of Economic Research said its forecast “suggests that August 2017 inflation could settle within the 2.6-3.4 percent range.”

This range is skewed upward from the inflation rate of 2.8 percent recorded in July.

“Increases in domestic petroleum prices, electricity rates in Meralco-serviced areas, and rice prices along with the depreciation of the peso could contribute to upward price pressures for the month,” BSP’s research unit said.

The central bank’s forecast jibed with the expectations of the Department of Finance’s chief economist, Undersecretary Gil Beltran, who said his office expected the prices of goods and services to have risen by 3.1 percent in August.

“The main reasons are food and oil, petroleum products,” Beltran said in a press briefing.
“For food, we are reaching the point wherein the supply in the market is low because it is the rainy season. But once harvest time comes, the prices will normalize.”

“By October food prices will start to decline for rice,” he said, adding that the overall food price basket had remained muted because of the decline in chicken prices, brought about by the recent outbreak of avian flu north of Metro Manila.

The increase in inflation was due mainly to rice and gasoline prices, he stressed, adding that the thinner rice stocks being experienced usually bottoms out in October when the rainy season ends, allowing the replanting of crops.

Meanwhile, the central bank said that it was keeping a close eye on inflation, including the potential effects of the weakening of the local currency against the US dollar.

“Moving forward, the BSP will continue to assess domestic and external factors that affect the balance of risks surrounding the inflation outlook in line with its mandate of delivering price stability conducive to a balanced and sustained economic growth,” the central bank said.