Inflation likely to hit 5.9% in Aug — BSP

The Bangko Sentral ng Pilipinas (BSP) expects inflation to remain elevated at a fresh nine-year high of 5.9 percent in August on the back of higher oil, rice, and food prices due to weather disturbances as well as more expensive power rates.

The central bank’s Department of Economic Research (DER) said inflation may settle at a range of 5.5 to 6.2 percent, implying a slight deceleration of the month-on-month inflation.

“Higher price of rice and key food items due to weather disturbances and supply disruptions, increase in gasoline and LPG prices, and slight upward adjustment in electricity rates in Meralcoserviced areas contributed to upward price pressures in August,” the BSP said.

On the other hand, the BSP said lower diesel and kerosene prices as well as modestly appreciated peso could partly temper price pressures in August.

“The BSP will remain watchful of economic and financial developments that could affect the inflation outlook and will closely monitor inflation expectations and emergence of further second-round effects ahead of the September Monetary Board policy meeting,” it said.

Earlier BSP Governor Nestor Espenilla Jr. said inflation would remain elevated but it may not hit six percent as it peaks either in August or September.

“In our forecast, we are not seeing six percent. It might be close to the last one,” Espenilla said.

Inflation leapt to a fresh five-year high of 5.7 percent in July from 5.6 percent in June, bringing the average inflation to 4.5 percent in the first seven months and exceeding the two to four percent target of the BSP.

Based on its latest assessment, the central bank now sees inflation averaging 4.9 instead of 4.5 percent this year and 3.7 instead of 3.3 percent next year due to higher oil prices, weak peso, and the impact of the implementation of Republic Act 10963 or the Tax Reform for Acceleration and Inclusion (TRAIN) Law.