Prices of consumer goods and services were expected to have risen between 2.2 to 3 percent in July — higher than the central bank’s forecast for June — due to rising rice and petroleum prices, according to the institution’s economists.
In a statement, Governor Benjamin Diokno said the Bangko Sentral ng Pilipinas’ Department of Economic Research saw the July inflation rate, which followed the 2.5 percent pace of price increases in June, to be likely caused by rising prices of fuel.
But domestic prices of basic goods and services were also expected to feel the benefits of a strong peso, which makes imported raw materials and other goods denominated in foreign currency less expensive, according to the BSP’s economists.
According to the central bank, upward price pressures will also be mitigated by slightly lower electricity rates in areas serviced by Meralco.
If confirmed, this relatively benign price regime will maintain the elbow room available to BSP’s Monetary Board to continue supporting the growth of the local economy through the prevailing low interest rate regime.
To date, the BSP’s various measures have released a total of P1.3 trillion into the financial system—equivalent to 6.4 percent of the country’s gross domestic product—to buttress the Philippine economy that is on its way to its first contraction in decades.
The central bank has also cut its key interest rate, which banks use to price their own loans, by a total of 175 basis points since the COVID-19 pandemic started.
Earlier this year, the Monetary Board approved a 200-basis-point reduction in reserve requirements of universal and commercial banks and non-bank financial institutions with quasi-banking functions.
“Going forward, the BSP will continue to monitor economic and financial developments to ensure that monetary policy settings remain consistent with the objective of price stability conducive to a balanced and sustained growth of the economy,” Diokno said.
The central bank’s previous inflation forecast was a range of 1.9-2.7 percent for June, which officially came in at 2.5 percent according to the government.
The Philippine Statistics Authority is scheduled to release the inflation data for July on Aug. 5.