Inflation likely climbed to another high of 5.9 percent year-on-year in August, the Bangko Sentral ng Pilipinas (BSP) said.
Citing the projection of its Department of Economic Research, the BSP said in a statement headline inflation would have settled within the range of 5.5-6.2 percent.
The BSP blamed the year-on-year increase in average consumer prices on higher rice and food costs due to weather disturbances, supply disruptions and higher gasoline, LPG and electricity expenses.
The upward trend in August was offset, however, by the decline in diesel and kerosene prices and the modest appreciation of the peso.
The BSP believes, however, that the change in prices from July was slower compared to the movements in previous months.
“The BSP will remain watchful of economic and financial developments that could affect the inflation outlook and will closely monitor inflation expectations and emergence of further second round effects ahead of the September 2018 Monetary Board policy meeting,” it said.
Last Tuesday during the Economic Journalists Association of the Philippines (Ejap) Economic Forum, BSP Governor Nestor A. Espenilla Jr. noted that “the inflation momentum is slowing down, as headline inflation has generally declined in month-on-month terms from 0.9 percent in January to 0.5 percent in July.”
“In particular, after spiking in the first quarter of 2018, the month-on-month changes for electricity, tobacco and sweetened beverages are seen to be slowly tapering off as we head deeper into the third quarter of the year. This supports our analysis that the impact of the excise tax adjustments is transitory,” according to Espenilla.
The BSP chief had said inflation momentum would “continue to lose steam” in the near term and return within target by next year.
Last July, headline inflation hit 5.7 percent, bringing the seven-month average to 4.5 percent, already above the government’s full-year target range of 2-4 percent.
Amid higher than expected inflation, the BSP’s policymaking Monetary Board hiked the key interest rate by 25 basis points in May and another 25 in June, followed by 50 bps—the most aggressive hike in a decade—in August.