Lower fuel prices saved the day from spike in pork costs, says BSP

MANILA, Philippines—Prices of goods and services likely rose by the same magnitude in April as it did in March as lower fuel prices helped prevent higher food costs from blowing inflation up, according to the Bangko Sentral ng Pilipinas (BSP), the Philippine central bank.

In a statement, BSP economists projected the April 2021 inflation rate to settle within the range of 4.2–5 percent—the same estimate range they made for March, which eventually saw consumer price index settle down officially at 4.5 percent.

“Lower prices of domestic petroleum products and key food items, such as fruits and vegetables due to improved supply conditions, are the main sources of downside price pressures during the month,” said the BSP.

“However, these could be partly offset by upward adjustment in Meralco electricity rates, coupled with higher prices of pork, fish, and rice,” it added.

The Philippine Statistics Authority was scheduled to release the inflation rate for April on May 5.

Markets are closely monitoring the country’s inflation rate which spiked in recent months mainly due to a pork shortage caused by an African swine fever outbreak that nearly decimated the local hog industry.

So far, the BSP has refrained from tightening monetary policy in response to the inflation spike, saying rising prices are caused by tangled supply lines which cannot be untangled by raising interest rates.

Instead, the BSP has called on government to increase supply by raising the ceiling for pork imports. The Duterte administration did not only that but also lowered tariff for importation of pork.

“Moving forward, the BSP will continue to monitor evolving economic and financial conditions to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” the BSP said.

Earlier, BSP Governor Benjamin Diokno said the latest inflation rate reinforced the regulator’s projection that the consumer price index will likely exceed the government’s full-year forecast range, but will return to normal in 2022.

“Inflation is still seen to return to within-target band in 2022 as supply-side influences subside,” he said, repeating his call for “timely and effective implementation of direct measures” by the national government that could contribute to price stability.

The latest BSP assessment of the inflation outlook indicated that the balance of risks remain broadly tilted around the baseline path in 2021, while leaning toward the downside in 2022.

The BSP chief also doused expectations that regulators would tighten liquidity in response to the inflation spike, saying the policy-making Monetary Board believes that the prevailing policy settings “remain appropriate” to support the government’s broader efforts to revive the economy.

TSB