BSP sees higher inflation in August

The Bangko Sentral ng Pilipinas (BSP) expects inflation to hover between 2.6 and 3.4 percent in August on the back of rising pump prices of petroleum products, higher electricity rates and the continued weakening of the peso.

The central bank’s Department of Economic Research (DER) said the increases in domestic petroleum prices, electricity rates in Meralco-serviced areas and rice prices along with the depreciation of the peso could contribute to upward price pressures for the month.

“Moving forward, the BSP will continue to assess domestic and external factors that affect the balance of risks surrounding the inflation outlook in line with its mandate of delivering price stability conducive to a balanced and sustained economic growth,” the BSP said.

Inflation inched up to 2.8 percent in July from 2.7 percent in June, bringing the average to 3.1 percent in the first seven months, well within the two to four percent target set by the BSP.

Last Aug. 10, the BSP’s Monetary Board raised its 2017 inflation forecasts to 3.2 percent from the original target of 3.1 percent.

The MB also raised the projected oil prices in the international market to $50.48 per barrel instead of $49.49 this year, $50.31 instead of $48.78 for 2018, and $51.36 instead of $49.54 for 2018 resulting in higher

pump prices of petroleum products in the Philippines. The higher inflation path is also due to the increase in domestic liquidity and credit growth as well as the continued weakening of the peso against the dollar on account of the expansion of domestic economic activity that would require more imports of capital goods and raw materials.

Earlier, BSP Deputy Governor Diwa Guinigundo said inflation could have peaked this year when it reached 3.4 percent last March and April.

“It may have likely peaked already when it hit 3.4 percent,” Guinigundo said.

Based on the forecasts made by the BSP, Guinigundo said inflation could still hit 3.4 percent in August.

He said rice prices that account for about nine percent of the total consumer basket would remain steady as importation by the state-run National Food Authority (NFA) and activation of the minimum access volume (MAV) at 805,200 metric tons.