BSP economists see continued inflation uptrend
Central bank economists expect the prices of goods and services to have risen even further for the month of April, due to a spike in the cost of crude oil in the international market that may have aggravated the country’s three-year high inflation rate.
In a statement, the Department of Economic Research of the Bangko Sentral ng Pilipinas said it projects the 2012-based April 2018 inflation to settle within the 3.9-4.7 percent range — higher than the 3.8-4.6 percent the group predicted for the month of March.
“This represents a slight upward revision,” the group said, adding that “geopolitical tensions in the Middle East caused a sharp increase in international oil prices spilling over to higher domestic petroleum prices for the month.”
The inflation rate for March was eventually revealed to have risen to 4.6 percent — the top end of the central bank’s range — and represented the fastest pace of price hikes in the domestic economy over the past three years.
The BSP is targeting an inflation rate of between 2-4 percent for this year and 2019, although it has already conceded that the pace of price increases will breach the 2018 goal.
“In addition, higher electricity rates in Meralco-serviced areas as well as higher rice prices due to supply conditions could contribute to additional price pressures,” the central bank economists said.
BSP officials had earlier maintained that inflation, though expected to stay high for the rest of the year, would correct itself by 2019 once the so-called “transitory effects” that were fueling the price hikes, including the tax increases enacted by the Duterte administration earlier this year, normalize.
But recent statements by regulators have become increasingly hawkish, pointing to a possible hike in the central bank’s key overnight borrowing rate when the policy making Monetary Board meets to decide on the direction of interest rates on May 10.
BSP Governor Nestor Espenilla Jr. said last week that, since the yields on longer-dated debt instruments had already risen in anticipation of an eventual rate hike, it would be “just a question of time” before the overnight rate yields rise as well.
“The BSP will continue to monitor closely evolving inflation dynamics over the policy horizon against any signs of incipient price pressures that may warrant a policy response,” the central bank economists said on Monday, echoing Espenilla’s earlier statement.
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