Inflation seen to settle at 2.3-3.2% in 2016

The Bangko Sentral ng Pilipinas (BSP) expects the January inflation to settle within the 2.3 to 3.2 percent range, within the government’s full year target.

“The BSP forecast suggests that January inflation could settle within the 2.3 to 3.2 percent range,” BSP Governor Amando Tetangco said in a text message.

BSP’s projection stands just within the government’s full year inflation target of two to four percent.

Tetangco said the drop in rice prices and power rates could pull down inflation during the reference period.

Meralco announced earlier that electricity rates went down P0.2703 per kilowatthour in January due to lower generation charge from its suppliers.

This brought power rates down to P8.09 per kWh, the lowest since October 2009.

Latest data from the Philippine Statistics Authority also showed that the farmgate price of rice declined to P17.79 per kilogram during the first week of the year, but picked up again to P17.99 per kilogram on the second week.

“However, higher domestic prices of gasoline, diesel and LPG (liquefied petroleum gas), as well as the excise tax adjustments for alcoholic beverages and tobacco products would likely exert upside pressures on inflation during the month,” Tetangco said.

Excise tax on cigarettes and alcoholic beverages have increased once again at the start of 2017.

“The BSP will continue to monitor emerging price conditions to ensure price stability conducive to a balances and sustainable economic growth,” Tetangco said.

The central bank earlier said it expects inflation to remain “manageable” at 3.3 percent this year.

“Thus there is no real pressing need to deviate from current stance of monetary policy. That said, we continue to monitor external developments that may affect our growth dynamics and financial markets. We will adjust policy levers as and when necessary,” Tetangco said.

The central bank during its last meeting in 2016 decided to maintain policy rates at 3.5 percent for the overnight lending facility, three percent for the overnight reverse repurchase facility and 2.5 percent for the overnight deposit facility.