BSP chief expects inflation to pick up

The rate of consumer price increases is bottoming out and a sharp acceleration is possible in the later months of the year as dryer weather, a result of the El Niño weather phenomenon, puts pressure on food costs.

Governor Amando M. Tetangco Jr. of the Bangko Sentral ng Pilipinas (BSP) said recent record-low inflation numbers were “transitory,” with consumer prices expected to rise at a faster clip heading into 2016.

El Niño stands as the main threat to policymakers, who have to manage the effects of dryer-than-usual weather on overall prices.

“My worry is the rise in inflation might be steep,” BDO chief market strategist Jonathan Ravelas said in an interview.

Last month, consumer prices were on average 0.8-percent higher than year-ago levels, based on the cost of a basket of goods tracked by the government. This inflation rate was the slowest on record and followed the previous historic low of 1.2 percent set in June.

Tetangco on Monday said the central bank expected the El Niño weather pattern to intensify in the coming months, leading to faster inflation.

“The declining inflation turnouts in the last few months are seen to be transitory,” he said. “The path of inflation going forward is seen to return to within target over the policy horizon,” Tetangco added.

For 2015, the BSP wants to keep inflation within its target of 2 to 4 percent, in line with its goal of keeping prices stable to protect consumers’ purchasing power. In the seven months to July, inflation averaged 1.9 percent. Paolo G. Montecillo