Inflation seen to average 4.1% this year

MANILA, Philippines - Economists expect inflation to remain elevated this year amid higher food prices and pending increases in power rates, according to a recent Bangko Sentral ng Pilipinas survey.

Inflation is seen averaging 4.1 percent this year, according to a survey of 28 banks done in May. It was the same figure from the survey done by the central bank back in March.

This is within the central bank’s three to five-percent target, although above the midpoint of the range.

“Analysts’ expectations of higher inflation going forward due to pending electricity rate adjustments, weakening peso, and possible increases in food prices—on account of weather-related disturbances—were tempered by expectations of capital outflows as US interest rates begging to normalize,” the BSP said.

Based on the survey, the lowest forecast was 2.8 percent, while the highest estimate was 4.7 percent.

Latest data showed inflation slowed down to 4.4 percent in June after hitting a 30-month high in May as a decrease in housing and utility prices tempered the sustained rise in food prices.

In the first half of the year, inflation averaged 4.2 percent, settling above the midpoint of the target range.

BSP Deputy Governor Diwa C. Guinigundo on Friday said the central bank remains watchful of the risks to the inflation target including the second-round effects that may stem from the higher cost of food.

“But right now, we have not seen evidence of potential second-round effects. There is sufficient scope for considering or addressing any potential second-round effects,” Guinigundo said.

“What is important here is a sustained surveillance of the possible risk particularly those coming from increases in food prices as well as possible adjustment in utility rates,” he continued.

For next year and in 2016, the BSP forecast inflation to settle within two to four percent. Economists surveyed by the central bank in May forecast the rate to average 3.8 percent in both years, near the upper end of the target.