BSP sees August inflation creeping up as fuel prices recover

The central bank sees the ave­rage pace of price increases in the local economy to have risen slightly in August, due mainly to recovering petroleum prices that have been on a shallow uptrend in the last couple of months.

In a mobile phone message to reporters, Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the agency’s Department of Economic Research projected the inflation rate to settle within the 2.5-3.3 percent range this month.

This is higher than the central bank’s forecast range for July of 2.2-3 percent, which turned out to be a six-month high of 2.7 percent when the government announced the official figures a few days later.

“Higher domestic prices of gasoline and [liquefied petroleum gas] provide upward price pressure during the month,” Diokno said. “These could be offset in part by the continued decline in Meralco power rates and the sustained appreciation of the peso along with broadly stable food prices.”

The central bank earlier said it was prepared to do more in terms of easing monetary policy to help the Philippine economy recover from its second quarter slump—the biggest contraction in recorded history.

At the same time, however, Diokno said he first wants to give the financial system time to digest the estimated P1.3 trillion in liquidity that the central bank has released into the system over the course of the pandemic through various policy measures.

“Moving forward, the BSP will continue to monitor emer­ging price developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” the central bank chief said.

For the month of July, in addition to recovering demand for basic goods and services, the government said that the lack of public transportation while more Filipinos returned to work during the gradual easing of the lockdown pushed transport costs higher for the second straight month.

The Philippine Statistics Authority data showed that the rate of increase in prices of basic commodities in July was the fastest since the 2.9 percent posted in January.

Month-on-month, consu­mer prices in July inched up 0.4 percent from June.

The July headline rate brought the seven-month ave­rage to 2.5 percent, within the government’s 2-4 percent target range.

In particular, transport inflation jumped to 6.3 percent last month from 2.4 percent a month ago, when most parts of the country were placed under a less-restrictive general community quarantine.