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BSP: Cheaper fuel to temper June inflation

By: - Reporter / @daxinq
/ 05:29 AM June 30, 2018

The inflation rate in June may have risen at a faster pace than the previous month’s record high of at least five years due to continued increases in the prices of basic commodities, especially rice, central bank economists said.

In a statement, the Bangko Sentral ng Pilipinas’ department of economic research said it was expecting the country’s inflation rate to rise to as high 5.1 percent this month, but may also come in as low as 4.3 percent, based on the 2012 price base.

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The unit—whose output guides the BSP’s Monetary Board in setting interest rate policy—said price hikes in basic goods were mitigated by reductions in prices in other sectors.

“Upward price pressures from rice and other agricultural commodities due to weather-related disruptions as well as the increase in liquefied petroleum gas prices could be partly tempered by the reduction in fuel prices and electricity rates in Meralco-serviced areas,” it said.

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The central bank’s economists regularly release inflation forecasts a week before the official numbers are announced by the government every fifth of the month. The BSP’s forecasts come in the form of a range with a gap of 0.8 percent between the high and low ends.

In May, the BSP’s forecast that inflation for the month would rise by 4.6-5.4 percent, and the official number came in at 4.6 percent—the highest level in at least five years (because prices based on the new 2012 base were unavailable).

The inflation rate in April came in at 4.5 percent after the central bank announced a forecast range of 3.9-4.7 percent. Finally, the official March inflation number came at 4.3 percent after BSP economists predicted a range of 3.8-4.6 percent.

Despite what ranking BSP officials believe is a moderating pace of price increases on a month-on-month basis, the economists said the central bank “will continue to keep a watchful eye on the risks to the inflation outlook to help ensure price stability conducive to a balanced and sustainable growth of the economy” going forward.

Earlier this month, the Monetary Board raised BSP’s key interest rate by 25 basis points for the second time in as many months in an attempt to cap rising prices. The overnight borrowing rate now stands at 3.5 percent, which is the basis on which financial institutions price their own loans to corporate and retail borrowers.

BSP Deputy Governor Diwa Guinigundo said monetary planners expected the pace of price increases for the rest of 2018 to ease and, as such, lowered the central bank’s inflation forecast slightly from 4.6 percent down to 4.5 percent for this year.

A downward revision of the same magnitude was made for 2019’s inflation forecast, from 3.4 percent down to 3.3 percent.

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TAGS: BSP, fuel, Inflation
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