Inflation steady at 3.4% in April, BSP to keep rates unchanged

MANILA, Philippines - The country’s inflation rate held steady at 3.4 percent in April as slower price adjustments in electricity and petroleum products cushioned the impact of higher food prices, the Philippine Statistics Authority (PSA) reported yesterday.

BSP Governor Amando Tetangco Jr. said the country’s policy settings remain appropriate as inflation remained manageable and within the two to four percent target set by the BSP.

The PSA said inflation remained unchanged at 3.4 percent in April, bringing the average inflation in the first four months of the year at 3.2 percent.

“The stable inflation rate in April is a respite from the upward inflation trend we saw in the first three months of the year,” said NEDA officer-in-charge and undersecretary for investment programming Rolando Tungpalan.

Excluding selected food and energy items, core inflation picked up by three percent in April from 2.9 percent in March.

Tetangco said authorities would continue to monitor oil price developments, supply and demand of basic commodities like rice as well as petitions in utility rates. 

“The numbers confirm the manageable inflation outlook for the year. At the moment, we deem the policy settings to be appropriate, but we continue to monitor changes in commodity prices particularly petroleum products as well as petitions for utility rate increases, which we see are possible risk factors to our baseline scenario,” Tetangco said.

The next rate-setting meeting of the BSP’s Monetary Board is scheduled on May 11.

The BSP has managed to adopt a dovish or accommodative stance since September 2014 when it last raised key policy rates by 25 basis points.

Last June, the central bank slashed interest rates as part of an operational adjustment with the shift to the interest rate corridor (IRC) aimed at bringing market rates closer to the policy rates.

Inflation in the non-food group decelerated to 2.7 percent in April from 2.8 percent in March due to the sluggish price adjustments of electricity, gas, and other fuels.

This could be traced to the resumption of operations of the Malampaya gas field after a two-month maintenance shutdown early this year.

Moreover, lower pump prices for unleaded gasoline, diesel, kerosene, and LPG last month also contributed to the slower increase in non-food inflation.

Inflation in the food and non-alcoholic beverage group accelerated to 4.2 percent from four percent. Prices of staples such as rice, meat, and fish remained high due to supply constraints, the PSA said.

The annual change in food alone index increased to 4.3 percent in April from 4.2 percent in March due to higher upticks in meat and fish.

Data from the PSA showed the country’s declining inventory of commercial and National Food Authority (NFA) rice.

Rolando Tungpalan, officer-in-charge at the National Economic and Development Authority (NEDA), said the stable inflation rate in April was a respite from the upward inflation trend in the first three months that brought inflation to a 28-month high of 3.4 percent in March.

“Nevertheless, volatilities in oil prices and erratic exchange rates can still manifest into higher domestic prices for both food and non-food commodities,” he said.

Tungpalan said the possible increases in transportation fares and electricity rates in the coming months could also exert upward pressure on prices, along with the transitory impact of the proposed tax reform program.

Food supply is expected to recover as normal rainfall pattern and natural weather conditions expected from March to August 2017 augur well for the crops sector.