Inflation accelerating

The rate of increase in consumer prices in June was expected to have breached the government’s threshold of 5 percent, due to increases in the salaries of government workers, tuition and prices of school supplies.

This was according to the projection by the Bangko Sentral ng Pilipinas, which said inflation in June had likely settled between 4.6 and 5.5 percent.

This is faster than the 4.3 percent registered in April and the average of 4.5 percent registered for the first five months of the year.

BSP Governor Amando Tetangco Jr. said, however, that although inflation is seen exceeding 5 percent in June and in the third quarter, the full-year average is still expected to fall within the official target of 4 to 5 percent. He added that inflation next year would likely stay within the original target.

“Our updated forecast inflation paths for the balance of 2011 and for 2012 still show that inflation would be manageable… We [BSP] will ensure that the liquidity generated by these flows will not create further inflationary pressures,” Tetangco told reporters on Wednesday.

Should the BSP’s inflation forecast for June materialize, the average inflation for the first half would settle between 4.5 percent and 4.7 percent.

Meanwhile, First Metro Investments Corp. said inflation was expected to accelerate in the third quarter, but added that the average for the year would be within “tolerable” levels.

According to FMIC’s own forecast, inflation would average this year at 4.6 percent.

Augusto Cosio, head of FMIC’s asset management group, said in a briefing Wednesday that concerns earlier this year over potentially worrisome inflation have somewhat eased.

FMIC cited the conduct of proper monetary policy, and ample supply of rice and other key agricultural products as factors keeping inflation within the targeted ceiling.

Despite this, the central bank this month increased the reserve requirement for banks, a move aimed at preventing the increase in consumer prices from accelerating beyond target levels.