Inflation further picking up steam

INFLATION may have quickened in October — on the back of higher fuel prices, utility rates, and a weaker peso — but at a pace not enough to make the Bangko Sentral ng Pilipinas (BSP) miss its full-year target, the monetary authority said yesterday.

In a statement, the BSP Department of Economic Research gave a 3.2-3.7% forecast inflation range for the month. The estimate compares to the 2.8- 3.6% given for September. Inflation in September was 3.4%, the fastest pace seen for the year to match the readings back in March and April.

“Increases in domestic petroleum prices, electricity rates in Meralco-serviced areas, and water rates in Maynilad- and Manila Water-serviced areas, as well as the weaker peso could contribute to upward price pressures for the month,” the central bank said yesterday.

The Philippine Statistics Authority will report official inflation data on Nov. 7. Inflation stood at 2.3% in October 2016.

Prices of widely used goods and services picked up by an average of 3.1% from January-September, comfortably within the BSP’s 2-4% target band.

The BSP expects inflation to average 3.2% this year.

Adding to price pressures was power distributor Manila Electric Co.’s (Meralco) move to raise for the fourth straight month in October its tariff. The country’s biggest power distributor announced a P0.0345 per kilowatthour increase in overall rates on the back of a higher generation charge.

Manila Water Co. and Maynilad Water Services, Inc. also announced higher rates for the fourth quarter to factor in the depreciation of the peso, which is a component of the basic charge imposed on their customers.

The peso had stayed within P51- to- the- dollar level this month, hitting an 11-year trough on Oct. 25.

Retail pump prices likewise rose over the last two weeks to mirror rising world crude prices, amid escalating tensions in the Middle East coupled with exchange rate adjustments. Yearto-date, fuel costs rose: by P4.24 per liter of gasoline, P4.35 per liter of diesel, and P10.58 per kilogram for cooking gas.

Despite the expected pickup in inflation, the BSP said average inflation is “expected to remain” within its 2-4% target range for 2017.

Inflation is the main consideration of the policy-setting Monetary Board in setting benchmark interest rates, which currently range between 2.5 and 3.5%. Monetary policy has been kept steady since September 2014, except for procedural adjustments introduced in June last year for the shift to an interest rate corridor regime.

The BSP kept policy rates unchanged during its Sept. 21 review on the back of manageable inflation and firm domestic demand. —