Inflation hits lowest since ’95
THE CENTRAL bank may keep interest rates steady, recognizing risks that may send prices rising in later months of the year to push inflation up from recent lows.
Government data yesterday showed that consumer prices rose at its slowest pace on record in June, bringing the year-to-date average further down. Drier weather as a result of the El Niño phenomenon may put the country’s food and power supply at risk.
“While near-term inflationary pressures have eased significantly, there are signs that drier-than-normal weather conditions are affecting agricultural output, with rice planting in some areas seeing delays,” Barclays bank economist Rahul Bajoria said in a note to clients.
Yesterday, the government released data showing inflation slowed to 1.2 percent in June, the slowest since 1995, which is as far back official records go. This was slower than May’s 1.6 percent and near the bottom end of the central bank’s forecast of 1.1 to 2 percent for the month.
June's decline was attributed mainly to more stable food and housing prices. Average inflation for the first semester of the year stood at 2 percent after June’s deceleration.
Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said that apart from El Niño, officials were wary of volatile conditions in financial markets as a result of developments in Greece.
Earlier, the BSP also raised concern over the prospect of the US Federal Reserve’s own-plan to raise interest rates, which may trigger capital flight from emerging markets and hurt currencies like the peso.
The BSP’s main goal is to protect consumers’ purchasing power by keeping prices stable. This is done through adjustments in in- terest rates and the use of various policy levers to manage the amount of money circulating in the economy.
Rates set by the BSP affect the amount of money banks lend to businesses and households, which, in turn, can influence demand for consumer goods. For 2015, the BSP wants to keep inflation within a range of 2 to 4 percent.