Muted April inflation seen but possible resurgence still worries policymakers

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

MANILA, Philippines–The pace of price increases in the Philippines is seen to have slowed further in April, but authorities remain worried that inflation could spike once more in the domestic economy due to the steady rise of fuel costs globally.

According to economists of the Bangko Sentral ng Pilipinas (BSP), last month’s inflation rate is likely to have risen with the 2.7-3.5 percent range. This is lower than the central bank’s forecast for March of 3.1-3.9 percent, and indicates a downward bias from the actual 3.3-percent inflation rate reported by the government for that month.

“Higher domestic oil prices and the slight upward adjustment in electricity rates are seen to provide upside price pressures for the month,” the central bank said in a statement, adding that these are expected to be counteracted by the continued decline in rice prices and by the peso appreciation.

This concern was echoed by the Duterte administration’s top economic manager, Finance Secretary Carlos Dominguez III, who also represents the government on the central bank’s policy making Monetary Board.

“World crude oil prices have been rising, so we’re keeping a close eye on that,” he told the Inquirer on Monday, when asked about the prospects of a monetary policy easing — either through an interest rate cut or a reduction in bank reserve requirements — in the face of declining inflation.

“It will all depend on fuel prices, because we’re worried that it could push [local] prices higher again,” he added.

BSP Governor Benjamin Diokno, who had been eager to ease monetary policy to aid economic growth when he took the central bank helm last month, has since adopted a similar cautious stance warning about the dangers of a resurgence in inflation.

He said over the weekend, however, that a rate cut was in the cards and it was just a matter of timing as to when it would be implemented. He also said that he was open to cutting banks’ reserve requirement ratios, currently at 18 percent, is data would show that he has policy space to do so.

“Moving forward, the BSP will continue to closely monitor evolving price trends and will undertake necessary measures towards its commitment to price stability,” he central bank said in its statement.

The Philippine Statistics Authority is scheduled to release the inflation data for April on May 7, 2019. /jpv

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