PH inflation seen benign

The Bangko Sentral ng Pilipinas believes that the rate of rise in consumer prices will remain benign throughout the year so long as wages will not increase further.

BSP Assistant Governor Ma. Cyd Tuaño-Amador said domestic price pressures eased in the past weeks as oil prices in the world market declined.

Moreover, Amador said, the business sector’s expectations that inflation this year will stay manageable will actually help temper price increases.

“Inflation expectations remain well anchored (to the target), and this gives comfort that increase in consumer prices will remain modest,” Amador said.

If people expect price increases to be generally moderate, economists said, they may refrain from purchasing more goods than they can currently consume. The tempered demand, in turn, will help slow down inflation. On the other hand, if people were to expect prices to surge in the coming months, then they would tend to buy more goods than they could consume, thereby accelerating inflation.

In the BSP’s latest survey on business sentiment, the inflation expectation index for the third quarter stood at +18.3 percent, lower than the +34.8 percent reported in the same period last year.

The decline in the index meant that fewer businesses expect inflation to accelerate in the next few months.

The government expects inflation to stay within the 3 to 5 percent range it has set for this year and the next. But inflation would only remain benign this year if no wage hikes were to occur this year.

Recently, the wage boards approved increases in pay of workers. For Metro Manila, daily wages had been hiked by P30.

BSP Deputy Governor Diwa Guinigundo said the P30 wage increase approved for Metro Manila was actually a bit higher than what the central bank had assumed.

“We have factored in about 5 percent wage adjustment for the year. A P30 wage adjustment is a little higher than our assumption, but that would still be broadly consistent with a 3-5 percent inflation target for 2012 and 2013,” Guinigundo said.

There have been petitions for an additional increase in wages. Labor groups stressed that the P30 increase was not enough. But the central bank believes any additional hike in wages will result in more significant price pressures.

Regional wage boards, where the BSP serves as consultant, are not expected to implement any more pay hikes this year, Guinigundo said.