BSP sees faster but still on-target inflation for Feb

MANILA, Philippines — Inflation may have picked up in February on the back of costlier food items like rice and higher energy prices, although price growth is still expected to have stayed within the target range of the Bangko Sentral ng Pilipinas (BSP).

Inflation last month was estimated to have settled at between 2.8 and 3.6 percent, the BSP said in a statement on Thursday.

“Continued price increases for key food items, such as rice, meat and fish, along with increased petroleum prices and electricity rates are the primary sources of upward price pressures for the month,” the central bank said.

“Meanwhile, lower prices of vegetables, fruits and sugar could contribute to downward price pressures,” it added.

If the upper end of the forecast range is realized, inflation in February would be faster than the 2.8 percent recorded in January, which was the lowest in over three years.

READ: Inflation softened in Jan to over three-year low of 2.8%

But the projection of the central bank fuels expectations that price growth would possibly stay within the state’s 2- to 4-percent target range for the third straight month.

Rate action

At its meeting last month, the Monetary Board left its benchmark rate unchanged at 6.5 percent, the highest in more than 16 years, in what the BSP called a “prudent” move amid persistent risks to the inflation outlook.

READ: In a ‘prudent’ move, BSP keeps key rate at 6.5%

What’s worrying the BSP at the moment are higher transport charges and electricity rates, as well as costlier oil and domestic food prices. The central bank is also wary of the additional impact on food prices of a strong El Niño episode.

For this year, the BSP said inflation would ease in the first quarter before potentially soaring above the target anew in the second quarter as favorable base effects fade. From there, price growth is projected to return to the target band in the third quarter to end the year at an average of 3.6 percent, a tad lower than the BSP’s previous baseline forecast of 3.7 percent.

Governor Eli Remolona Jr. had said a rate cut was possible this year as inflation showed signs of softening, although analysts said the BSP might be waiting for a more convincing slowdown of price growth before making any easing moves.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision-making,” the central bank said.