BSP sees 3%-3.8% inflation for March

The Bangko Sentral ng Pilipinas (BSP) estimates that March’s average inflation rate will either hit a low of three percent compared to February’s 3.3 percent or be higher at 3.8 percent because of the peso’s depreciated value and increased power costs.

“The BSP forecast suggests that March inflation could settle within the three percent to 3.8 percent range,” said BSP Governor Amando M. Tetangco Jr. yesterday.

Tetangco said a high rate of 3.8 percent for March would be triggered by increased power rates in areas serviced by the Manila Electric Co. following the Malampaya maintenance shutdown. The weaker peso which has lounged at the R50.35:$1 level is another factor that pulls inflation higher.

However, he said a lower average is still possible due to the decline in fuel and food prices in March.

“Moving forward, the BSP will remain watchful of economic and financial developments that could affect the inflation outlook, in line with its commitment to price stability conducive to a balanced and sustainable growth of the economy,” said Tetangco.

Last week the BSP had its third policy meeting this year last and as expected, it did not change the three percent rate it charges on its overnight borrowing facility.

Tetangco, at the time, announced that they kept key rates unchanged because the outlook for inflation “remains manageable (and) consistent with favorable growth prospects.” The two percent to four percent inflation target for 2017 is also intact.

During the meeting, the BSP cut its inflation forecast to 3.4 percent this year from its previous estimate of 3.5 percent. For 2018, the forecast is also lowered to three percent from 3.1 percent previously.

The central bank reiterated that inflation rate went up in January and February primarily because of food and oil price increases and also due to base effects, however the average rate would still remain within the target band over the policy horizon.

Earlier, after the US Federal Reserve raised its policy rates by 25 basis points, Tetangco already gave broad hints that the BSP will not follow suit. In fact the BSP chief said the normalization of US rates will prove positive for the country over time.