Sept inflation likely at 2.8%–3.6% — BSP

Inflation likely rose within the 2.8 percent to 3.6 percent range in September due to higher fuel, electricity and food prices, as well as the further weakening of the peso, the Bangko Sentral ng Pilipinas (BSP) said.

“The forecast of the BSP’s Department of Economic Research suggests that September 2017 inflation could settle within the 2.8 to 3.6 percent range,” the BSP said in a statement.

Headline inflation climbed to 3.1 percent in August from 2.8 percent the previous month, and two percent in August last year. This brought average inflation to 3.1 percent in the first eight months.

The BSP’s economic research group said the expected uptick in inflation could have been driven by higher petroleum prices, increase in electricity rates, the rise in prices of rice during lean months, and the weaker peso.

“Higher prices of petroleum and rice, along with the increase in electricity rates in Meralco serviced areas and a more depreciated peso were seen to contribute to the upward prices pressures for the month,” the BSP said.

Earlier, Meralco announced that electricity rates in September went up P0.8642 per kilowatt hour to settle at P8.09 per kilowatt hour.

Latest data from the Philippine Statistics Authority also showed the farmgate price of palay as of the third week of September rose to P19.49 per kilogram as compared to P18.59 per kilogram in the same period last year.

The peso, meanwhile, continued to hover near the 51 to $1 level during the month in review.

Despite the projected pick up in inflation, the BSP said average inflation for 2017 is still expected to be within the government’s two to four percent target.

Earlier, BSP Governor Nestor Espenilla said inflation is projected to settle near the mid-point of the target range between 2017 and 2019.

He further noted the withintarget inflation gives the BSP the flexibility to assess its monetary tools and strengthen its responsiveness to the evolving requirements of the economy.

During its latest meeting last Sept.20, the Monetary Board of the BSP kept interest rates steady on the back of the manageable inflation environment.

Espenilla said while balance of risks to the inflation continue to be on the upside due to the proposed tax reform program, various social safety nets and the resulting improvement in output and productivity are expected to temper its impact on inflation.