BSP sees uptick in August inflation on higher energy costs

The central bank expects the average prices of basic goods and services in the country to have risen at a slightly faster clip in August after easing to within the government’s official target range in the previous month.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said it projected the August inflation to settle within the 4.1 to 4.9 percent range, due to higher energy prices.

Specifically, the BSP said it expected the higher prices of liquefied petroleum gas, electricity rates charged by the country’s largest power distributor, Meralco, and costs of key food items, along with the depreciation of the peso, as the main sources of the upward price pressures during the month.

“These could be offset in part by the decline in domestic petroleum and rice prices,” the BSP said.

The July inflation rate came in at 4 percent.

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

Easing toward end of 2021

The central bank believes the inflation rate—which has remained stubbornly high since the outbreak of the African swine fever in late 2019 that the decimated the Philippine hog industry—will ease toward year-end, and return to within the government’s 2 to 4 percent target band by next year.

Earlier, BSP Governor Benjamin Diokno reiterated his stance on maintaining interest rates as low as possible for as long as possible to help the Philippine economy from its deepest postwar slump due to the coronavirus pandemic.

Currently, the central bank’s overnight borrowing rate, which influences how much banks price their commercial loans, stands at a record low of 2 percent, with market watchers not expecting the monetary authority to raise rates anytime until at least mid-2022.

Monetary policy support

“The Monetary Board remains keen on sustaining monetary policy support for as long as necessary in order for the momentum of economic recovery to gain more traction as well as to help boost domestic demand and market confidence, especially as risk aversion continues to temper credit activity,” Diokno said.

He warned that the reimposition of quarantine measures to arrest the recent wave of COVID-19 cases could pose a risk to the ongoing economic recovery effort.

To this end, targeted fiscal and health interventions, especially the acceleration of the government’s vaccination program, will be crucial in safeguarding public health and preventing deeper negative effects on the Philippine economy, he said. INQ