Inflation eases to record-low 0.6% in August

MANILA, Philippines - Inflation eased to a fresh low of 0.6 percent in August from 0.8 percent in July amid declining food prices as well as cheaper power rates and lower transport fares brought about by the declining global oil prices, the Philippine Statistics Office (PSA) reported yesterday.

Inflation was recorded at 4.9 percent in August last year.

For the first eight months of the year, the average inflation settled at 1.7 percent, below the government’s two- to four-percent target for the year.

According to Finance Undersecretary Gil Beltran, the record-low inflation has given policymakers more space to maneuver  at a time the El Nino phenomenon in the Asia Pacific  threatens the local economy.

“Sustained lower rates of inflation would give policymakers more headroom to respond to external and internal economic shocks,” Beltran said in an economic bulletin e-mailed to reporters.

Among others, Beltran said this would allow the government to better tackle the El Nino phenomenon expected to persist until the middle of next year.

 “The government and the private sector should cooperate in crafting the appropriate policy response (to El Niño),” he explained.

Inflation in the National Capital Region (NCR) eased to 0.2 percent in August from 0.8 percent in July, while consumer prices in areas outside NCR was unchanged at 0.8 percent.

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said last month’s inflation fell within the 0.2 percent to one percent forecast of the central bank.

The BSP has set an inflation target of two percent to four percent this year but latest forecast of the central bank shows inflation falling below the target at 1.9 percent this year.

The BSP sees inflation falling within the target starting next year.

 “August inflation figure was well within our forecast range and helps to keep us on track to the path of within target inflation for 2016 and 2017,” Tetangco said.

Monetary authorities, he explained, would continue to monitor the price of all in the world market as well as the impact of the prolonged El Niño that is expected to last until the first quarter of next year.

 “We’ll continue to monitor developments in global oil prices, track El Niño as well as coordinate with relevant agencies of government on mitigants to El Niño’s adverse impact. We’re also mindful of global developments and heir effects on domestic liquidity,” he said.

The BSP has kept interest rates steady since September last year. The overnight borrowing rate is pegged at four percent while overnight lending rate stood at six percent.

 “We will make adjustment to policy if needed to ensure just enough liquidity in the market so favorable inflation path is sustained,” the BSP chief said.

ING Bank Manila senior economist Joey Cuyegkeng said the easing of headline inflation as well as core inflation last month would give the BSP enough room to keep interest rates steady.

 “Both inflation indicators enhances monetary policy leeway to respond accordingly risks to inflation and expectations and to financial sector stability from external developments including that from US monetary policy outlook and China and global growth risks and El Nino related inflationary pressures,” he said.

According to him, the BSP is likely to keep its current monetary stance unchanged this year.

 “Need for monetary policy stimulus to spur economic growth is low for now with promising drivers of growth in the second quarter sustaining the pace of growth or gaining momentum in the second half,” Cuyegkeng said.—With Prinz Magtulis and Ted Torres