Inflation seen rising to 5.5% in August

MANILA, Philippines - Inflation may rise to a five-year high of 5.5 percent in August on the back of rising food prices and upward adjustments in power rates, the Bangko Sentral ng Pilipinas said yesterday.

BSP Governor Amando M. Tetangco Jr. said in a text message to reporters the rate is forecast to settle within 4.7 to 5.5 percent this month.

The upper end of the forecast range is the fastest rate seen following the 5.6 percent recorded in April 2009.

“The BSP forecasts incorporate the impact of reported increases in certain food products and in power rates due to weather-related supply and distribution constraints,” Tetangco said.

“Lower pump prices of oil are expected to partly offset said increases,” he said.

August inflation data will be released on Friday next week (Sept. 5).

Inflation already rose to a 33-month high of 4.9 percent in July, driven by soaring food prices and hikes in utility rates and transportation fares.

This brought the seven-month average to 4.3 percent, above the midpoint of the central bank’s three- to five-percent target for this year.

Tetangco said the BSP is ready to deploy the necessary measures in order to keep the rate within the government target.

 “The BSP stands ready to implement necessary policy actions to ensure that inflation expectations remain well-anchored and limit any potential build-up of second round effects of current price pressures,” Tetangco said.

Last month, monetary authorities already raised key policy rates to safeguard inflation targets for this year and the next. At the same time, the BSP also hiked the banks’ reserve requirements and the special deposit account rate to rein in the strong liquidity growth.