March inflation spikes to 3.4%, highest in 28 months
Inflation quickened for the fifth straight month in March, hitting a 28-month high of 3.4 percent from 3.3 percent in February due to higher oil prices and electricity costs.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said inflation last month was well within the central bank’s forecast range of three to 3.8 percent.
“As we have said, our runs show that the path of monthly inflation shows upticks until about the third quarter of this year before slowly decelerating to average within the target range,” he said.
Tetangco earlier said inflation is expected to rise close to the upper range of the BSP’s two to four percent target until the third quarter of the year due to higher food and oil prices.
Inflation in March was the highest since November 2014, when the consumer price index averaged 3.7 percent. It has been inching up steadily since last year: from 2.3 percent in October to 2.5 percent in November, 2.6 percent in December, to this year’s 2.7 percent in January, 3.3 percent in February and 3.4 percent in March.
This brought average inflation to 3.2 percent in the first three months of the year.
Last month, the BSP’s Mone- tary Board lowered the inflation forecast to 3.4 percent instead of 3.5 percent for this year, and to three percent instead of 3.1 percent for 2018 on lower oil prices and global economic uncertainties.
The Philippines managed to post 72 consecutive quarters of positive gross domestic product (GDP) growth amid the benign inflation environment. Its growth accelerated to 6.8 percent last year from 5.9 percent in 2015 amid the boost from election-related spending as well as higher investment growth.
Economic managers penciled a GDP growth of between 6.5 and 7.5 percent for this year.
The robust domestic demand and benign inflation environment has allowed monetary authorities to keep a dovish stance. It last tweaked interest rates in September 2014 when key rates were increased by 25 basis points.
The BSP chief said authorities would closely monitor the movement of oil prices in the world market, as well as the passage of the proposed Comprehensive Tax Reform Program (CTRP).
“While we don’t see any immediate need to tweak policy rate settings, we are watching the international oil supply picture, developments in the CTRP, geopolitical developments, among others. We will make adjustments if and when needed,” Tetangco said.
Data released by the Philippine Statistics Authority (PSA) showed higher annual mark-ups were posted by the alcoholic, beverage, and tobacco at 6.4 percent; clothing and footwear at 2.9 percent; housing, water, electricity, gas and other fuels at four percent; furnishing, household equipment, and routine maintenance of the house at 2.5 percent; and health at 2.8 percent.
Higher charges for electricity rates were observed in all regions last month. Ship fare hikes and upward adjustments in the prices of gasoline, diesel, LPG, alcoholic beverages and cigarettes were also recorded in the National Capital Region and in many provinces.
The annual growth in the food index alone decelerated to 4.2 percent in March from 4.3 percent in February as slower annual hikes were noted in the indices of fish, vegetables, sugar, jam, honey, chocolate, confectionery, and other food products.
Headline inflation increased for a seventh consecutive month in March. Though headline inflation may be close to peaking, core inflation is likely to continue rising given the strength in domestic demand. The PSA believes starting in Q3 2017, the central bank will raise its policy rate by a cumulative 50 bps this year.
ANZ Bank economist Eugenia Victorino said headline inflation is expected to top out in the second quarter and remain in the upper half of the BSP’s two to four percent target for both 2017 and 2018.