BSP exec sees stable inflation until yearend
INFLATION will likely remain below four percent in 2017’s remaining months, a senior central bank official said, noting that prices are unlikely to see a “significant” pickup from a more-than-two-year peak earlier this year.
Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa C. Guinigundo said inflation will stay comfortably within the 2-4% target range for the rest of the year, even as the government approved a bigger- than- expected increase in daily minimum wage that could drive price increases faster next quarter.
The BSP’s Monetary Board kept its 3.2% inflation estimate for 2017 during its latest monetary policy review on Thursday last week, even as it noted that higher oil prices, a weaker peso and the P21 increase in daily pay for private sector minimum wage earners in Metro Manila are expected to drive costs upward in the last few months of the year.
Mr. Guinigundo noted that the wage hike, which takes effect next month, is higher than the P18 a day which the central bank initially expected.
“[ W]hether it (inflation) will peak in the third or the fourth quarter, we don’t expect a very significant blip other than those that have been hit earlier,” Mr. Guinigundo said in a press briefing last week.
“If there is anything that will represent another high for the rest of the year, that should not be very different from the high which was achieved earlier which was 3.4% [in March and April].”
Mr. Guinigundo said the latest inflation estimate also factors in a 50% chance of a La Niña episode from September- November to January- March, with excessive rains and resulting floods expected to weigh on the production of some crops.
So far, overall price increases averaged 3.1% as of end-August, hovering below the central bank’s full-year estimate.
The central bank decides on monetary policy settings based largely on inflation, given its mandate of keeping the prices of widely used goods and services low and stable, and overall economic growth.
In its meeting on Thursday last week, the central bank decided to keep the benchmark borrowing rates at the 2.5-3.5% range, noting that inflation remains “manageable” alongside firm domestic economic activity.
With inflation seen settling within target, several analysts have said that this gives room for the central bank to keep interest rates steady for the rest of the year, although some say that one hike may still be needed by December in order for the Philippines to catch up with rising yields in the United States and other major markets. —