BSP sees inflation at 2.8-3.6% in September

Bangko Sentral ng Pilipinas (File photo / Philippine Daily Inquirer)

The weaker peso as well as increases in the costs of rice, oil and power likely raised inflation by 2.8-3.6 percent in September, the Bangko Sentral ng Pilipinas (BSP) said Friday.

Citing the forecast of its Department of Economic Research, the BSP said in a statement that the projected range for the month will still allow average inflation for the entire year to remain within the government’s target of 2-4 percent.

As of August, the rate of increase in prices of basic goods averaged 3.1 percent.

In September, “higher prices of domestic petroleum and rice along with the increase in electricity rates in Meralco-serviced areas and a more depreciated peso were seen to contribute to upward price pressures,” the BSP said.

The peso remained at 11-year lows in September, trading at the 51:$1 level.

In August, inflation rose 3.1 percent, the fastest in three months, partly due to higher food, fuel and power prices coupled with a weaker peso,

Last week, the Monetary Board kept the policy rate or overnight reverse repurchase facility at 3 percent, while also maintaining the overnight lending and deposit facilities.

The Monetary Board, the BSP’s highest policymaking body, had also left the reserve requirement ratios unchanged, as it deemed that “the inflation environment remains manageable” such that the rate of increase in prices of basic goods was seen settling within the government target range in the next three years.

“The balance of risks to the inflation outlook also continues to be on the upside. While the proposed tax reform program may exert potential transitory pressures on prices, various social safety nets and the resulting improvement in output and productivity are also expected to temper the impact on inflation over the medium term,” BSP Governor Nestor A. Espenilla Jr. had said.

The proposed first package of the Duterte administration’s comprehensive tax reform program aimed at reducing personal income tax rates while jacking up taxes on consumption will be up for discussion at the Senate plenary starting next week, as the government eyes its implementation early next year.

Espenilla had said that “while prospects for global economic growth have stayed broadly upbeat, geopolitical tensions and lingering uncertainty over macroeconomic policies in advanced economies continue to pose downside risks to external demand.”

“The outlook for domestic economic activity remains firm, supported by positive consumer and business sentiment and ample liquidity. Moreover, as credit for production activities continues to expand in line with output growth, the economy’s absorptive capacity is likewise seen to improve, thus mitigating inflation pressures over the long run. Nonetheless, the Monetary Board remains watchful over evolving economic growth and liquidity conditions and their implications for price and financial stability,” Espenilla had said.

“Based on these considerations, the Monetary Board believes that prevailing monetary policy settings continue to be appropriate. Looking ahead, the BSP will continue to be vigilant against any risks to the inflation outlook and will adjust its policy settings as needed to ensure stable prices while supporting sustainable economic growth,” according to Espenilla. /jpv