BSP sees prices rising anew in Q2

The Bangko Sentral ng Pilipinas expects inflation rates to exceed its target range in the second quarter due to the El Niño weather phenomenon.

February inflation rose to 3.4 percent from 2.8 percent in January, mainly due to higher prices of food and transport. (See related story)

However, the latest inflation level remained within the 2 to 4 percent target of the BSP and its February forecast ranging from 2.8 percent to 3.6 percent.

In a statement released Tuesday, the BSP said the “strong” El Niño will continue to especially limit rice production, forcing retailers to raise their prices.

“The risks to the inflation outlook have receded but remain tilted toward the upside,” the BSP said.

Statistics showed that rice inflation rose to 23.7 percent year-on-year from 22.6 percent in January.

Meanwhile, transport costs increased to 1.2 percent from 0.3 percent due to global oil price hikes.

BSP said it would likely keep its tight monetary policy in the following months to help manage inflation as risks from El Niño linger and positive base effects in statistics take place.

Currently, the central bank has set its policy rate at 6.5 percent.

“Looking ahead, the BSP Monetary Board deems it appropriate to keep the BSP’s monetary policy settings unchanged in the near term amid the improvement in inflation conditions,” the central bank said.

“The BSP also continues to support the National Government’s non-monetary measures to address supply-side pressures on prices and sustain the disinflation process,” it added.

Apart from high food and transport prices, HSBC economist Aris Dacanay said inflationary risks include the senators’ proposal for a P100 increase in the minimum wage for private sector workers nationwide.

Senate President Miguel Zubiri said this would help workers sustain their basic needs amid the high prices of goods and services.

The wage proposal was passed on the third and final reading in the Senate. The House of Representatives, however, said it would be making a slow and comprehensive analysis of the proposal.

Dacanay said the country’s sustained economic growth will drive the likely longer implementation of elevated interest rates.