BSP sees December inflation at 1.8 to 2.6 percent

Inflation likely inched up in December as a result of higher power rates and petroleum prices which tend to push the cost of other goods and services upward, according to economists of the Bangko Sentral ng Pilipinas (BSP).

In a statement, the BSP’s Department of Economic Research projected inflation in the final month of 2019 to rise between 1.8 to 2.6 percent.

In addition to these primary sources of inflation rise, consumer prices were also expected to move up as a result of “weather-related disturbances on selected food items,” the BSP said.

Inflation forecast by the central bank for December was higher than the 0.9 to 1.7 percent projected last November, which saw a 42-month record low inflation of a measly 0.8 percent.

Actual inflation last November, however, settled at 1.3 percent. The Philippine Statistics Authority (PSA) was set to announce consumer price index for December in early January 2020.

The light at the end of the tunnel, however, could be provided by the continued stability of rice prices, the BSP said.

It had earlier said it expected October inflation rate to be lowest in 2019 and that prices of basic goods and services were likely to slither up to more normal levels during the holiday season.

The BSP, earlier in December, had declared victory in its war on inflation after a two-year battle, saying prices of consumer goods and services in 2020 and beyond were likely to be “benign.”

BSP Governor Benjamin Diokno also announced that the Monetary Board had decided not to change interest rates on the BSP’s overnight reverse repurchase facility and keep it at 4 percent.

“The Monetary Board’s decision is based on its assessment of a benign inflation environment,” Diokno said at a press briefing.

Future inflation, Diokno added, was likely to stay within the target range of 3 percent in 2020 and 2021 “with well-anchored inflation expectations.”

Diokno also sought to manage market expectations, saying that inflation was likely to be up in 2020 but down in 2021.

“The BSP will remain watchful of evolving price trends and ensure that the monetary policy stance remains appropriate to maintain price stability that is conducive to a balanced and sustainable economic growth,” the BSP’s economists said in their statement.

Edited by TSB