Lower rice prices, strong peso to ease February inflation, says BSP

The Bangko Sentral ng Pilipinas said Thursday, February 28, 2019, that consumer prices may have increased at a slower pace this month compared to January as the normalizing prices of rice and agricultural products received a further boost from the strong peso. INQUIRER FILE PHOTO

MANILA, Philippines – Consumer prices may have increased at a slower pace in February compared to the previous month as the normalizing prices of rice and agricultural products received a further boost from the strong peso, the central bank said Thursday.

In a press statement, the Bangko Sentral ng Pilipinas (BSP) said its economists expect February 2019 inflation to settle within the 3.7-4.5 percent range.

“Higher domestic oil prices and the upward adjustment in electricity rates provided upside price pressures to inflation during the month,” BSP said. “These may be partly offset by lower prices of rice and other agricultural commodities given the appreciation of the peso and ample supply particularly of rice following the recent harvest and arrival of rice imports.”

This forecast range marks an improvement in the central bank’s price expectations for February compared to January for which it forecast a consumer price index range of 4.3-5.1 percent, with the official government number coming in at 4.4 percent that month.

Despite the declining inflationary trend, BSP Deputy Governor Diwa Guinigundo said the central bank will remain patient and seek further confirmation before cutting interest rates or reducing banks’ reserve requirements — an insurance policy against the resurgence of any price spikes.

Last year, the central bank hikes its key overnight borrowing rate by 175 basis points over several months in the later part of the 2018 in response to the sharpest increase in inflation in almost a decade.

The inflation rate averaged 5.2 percent last year, due to tightness in rice supply and other agricultural products, the increase in world oil prices and the aggravating effects of a legislated tax increase locally.

“Looking ahead, the BSP will continue to be watchful of evolving price trends to ensure that the monetary policy stance remains appropriate to maintaining price stability that is conducive to a balanced and sustainable growth of the economy and employment,” the central bank said.

The inflation rate for February will be announced by the Philippine Statistics Authority on Wednesday, March 6, 2019. /kga