BSP eyes August inflation at 1.3% to 2.1%

BSP officials said they expect domestic inflation rate to go down to the one percent level in the second half of this year, a big drop from multiyear highs in same period last year. (Shutterstock Photo)

MANILA — Philippine monetary officials forecast a further deceleration of the inflation rate with August 2019 figure projected to stay between 1.3 to 2.1 percent given the lower fuel prices.

In a statement Friday, the Bangko Sentral ng Pilipinas (BSP) said its Department of Economic Research (DER) also cited the continued decline in rice prices and the downward adjustment in electricity rates as plus factors.

It noted that these factors may be countered by the latest weakness of the Philippine peso against the US dollar and the uptick in the prices of some food items.

“Moving forward, the BSP will remain watchful of economic and financial developments that could affect the inflation environment in line with its commitment to price stability conducive to long-term economic growth,” it added.

In the first seven months of this year, the rate of price increases averaged at 3.3 percent but still within the government’s two to four-percent target band.

Last July alone, inflation posted slower growth to 2.4 percent from the previous month’s 2.7 percent.

BSP officials said they expect domestic inflation rate to go down to the one percent level in the second half of this year, a big drop from multiyear highs in same period last year.

The rate of price increases posted its highest level last year in September and October at 6.7 percent due to the elevated prices of select agricultural products, particularly rice, because of supply issues.

However, a total of 175 basis points increase in the BSP’s key rates and the non-monetary measures, such as the release of rice stocks from all National Food Authority (NFA) warehouses, helped address the elevated prices since the latter part of last year.

Inflation has decelerated since November last year although an uptick occurred last May when it rose to 3.2 percent from the previous month’s three percent due to the faster rate increase in some food items.

Monetary officials are confident that inflation will continue to post slower growth in the remaining months of the year.