Inflation may hit 2-4% target range in Dec, says BSP

MANILA, Philippines  -There’s a chance that inflation finally returned to the government’s 2 to 4 percent target range in December, as cheaper farm products and utility costs offset the faster increase in prices of rice and meat during the month.

Inflation, as measured by the Consumer Price Index, likely settled between 3.6 and 4.4 percent this month, the Bangko Sentral ng Pilipinas (BSP) said in a statement.

If the lower end of the forecast range is realized, then it would mark the third straight month of deceleration after inflation softened again to 4.1 percent in November. Notably, price growth would sustain a downtrend at a time when strong demand during the Christmas shopping season typically pushes up prices of key consumer items.

Explaining its projection, the BSP said higher prices of rice and meat were the primary sources of upward price pressures in December.

READ: Prices of Noche Buena items rise

Such increases were seen as the prices of so-called “Noche Buena” items like ham and fruit cocktail had risen by as much as a fifth year-on-year ahead of the holidays in November, according to the new price guide released by the Department of Trade.

Lower prices

But the BSP said those price hikes were offset by lower prices of other food items such as vegetables, fruits and fish.

At the same time, the central bank said cheaper electricity rates and lower petroleum prices also helped temper inflation in December.

Price rollbacks

Recall that Manila Electric Co., the largest power distributor in the country, announced a decrease of P0.7961 per kWh in the December electricity rate. Meanwhile, government data showed local oil companies adjusted their prices thrice this month, most of which were decreases.

READ: Meralco cuts December electricity rate by nearly 80¢ per kWh

Moving forward, a within-target inflation will ease the pressure on the BSP to keep its ultra-tight monetary policy settings.

Governor Eli Remolona Jr. early this month said the central bank would only consider cutting its policy rate if both price growth and inflation expectations were in a “comfortable” range. This, amid the threat of a prolonged El Niño weather phenomenon that may jack up food and power costs. INQ