BSP sees muted uptick of consumer prices in February

Prices of basic goods and services may have increased at a more moderate pace in February due to lower food prices and further mitigated by lower energy costs, the central bank said on Friday.

In a press statement, economists of the Bangko Sentral ng Pilipinas (BSP) said they expected the inflation rate in the second month of 2020 to have risen from 2.4 to 3.2 percent.

“Lower prices of petroleum products, electricity and rice as well as other food products are expected to temper price pressures in February,” the BSP’s Department of Economic Research said.

The central bank’s forecast range for February is slightly lower than the inflation rate of 2.5 to 3.2 percent that it had predicted for January. That figure eventually turned out to be 2.9 percent—near the midpoint of BSP’s expectations—once announced officially by the Philippine Statistics Authority a few days later.

“Looking ahead, the BSP will remain watchful of economic and financial developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” the central bank’s economists said.

The policymaking Monetary Board is scheduled to convene on March 19 for their second interest rate-setting meeting of the year, during which they will evaluate the country’s economic situation to determine whether a further interest rate reduction is needed to help spur growth.

Apart from a tame inflation environment, analysts also expect the central bank to take into consideration the potential downside risks posed by the Covid-19 virus outbreak on the Philippine economy.

Already, the Monetary Board cut it’s key interest rate by 25 basis points in early February as a “preemptive” move against weaker economic growth after the gross domestic product figure for the fourth quarter of 2019 turned out to be lower than expected.

Earlier this year, BSP Governor Benjamin Diokno said he expected prices of basic goods and services in the Philippines to inch up in 2020 as the inflation rate continued to “normalize” then ease up in 2021.

Despite this, the country’s average inflation rate for 2020 and 2021 will almost certainly fall within the government’s forecast range of 2-4 percentage points, according to Diokno.