BSP: Inflation risks “broadly balanced”

The Bangko Sentral ng Pilipinas (BSP) said the distribution of risks to inflation remains "broadly balanced," as the inflation rate registered on the slow side during first quarter of 2015.

In a report released Friday, the BSP said inflation for the first quarter of the year settled at 2.4 percent, lower than the 3.6 percent in the fourth quarter of 2014 and the 4.1 percent in the first three months of last year, and well within the government's target range.

The inflation path for 2015 and 2016 has shifted downward, with a balance between the upside and downside risks, the central bank said.

However, possible adjustments in electricity rates due to pending petitions pose upside risks.

The BSP said this include the Manila Electric company's petition for the December 2013 rate adjustment which is remains the subject of a restraining order from the Supreme Court.

Also presenting an upside risk are possible power outages in the summer.

Power outages "could raise generation prices," the BSP said, with the country having "thin power reserves... Should the outages materialize, production costs would likely increase, potentially resulting in manufacturing delays," it said, noting such a situation could "cause inflationary pressures."

On the other hand, the BSP said the pending petition to lower nationwide fares of buses "could pull down inflation."

Inflation is expected to remain low in the year, "near the low-end of the target range," the BSP said in its report, attributing the downtrend "mainly to the significant decline in oil prices and the lower-than-assumed actual wage hike."

The forecast path shows "a modest uptrend" in 2016, though still within the lower half of the target range. (Wires)