April inflation seen at 0.7%-1.5%

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) expects inflation to settle between 0.7 and to 1.5 percent this month amid rising oil prices as well as higher utility rates.

BSP Governor Amando Tetangco Jr. said the rebound in oil prices and the rise in utility rates particularly for power and water are putting upward pressure on consumer prices.

“Increase in domestic oil prices, as well as in power and water rates pose inflation pressures during the month,” he said.

Latest data from the Philippine Statistics Authority (PSA) showed inflation kicked up to 1.1 percent in March from 0.9 percent in February amid the slight uptick in food prices as well as higher pump prices of fuel products.

The BSP has set an inflation target of between two and four percent for this year and next year.

Inflation eased to 1.4 percent last year from 4.1 percent in 2014 due to stable food prices and cheaper utility rates.

 On the other hand, the country’s gross domestic product (GDP) growth slowed down to 5.8 percent last year from 6.1 percent due to weak global demand and lack of government spending.

The benign inflation environment and robust domestic demand allowed the BSP to keep interest rates unchanged for 12 straight policy rate setting meetings since October 2014 last March 23.

The BSP has pegged the overnight borrowing rate at four percent, the overnight lending rate at six percent, and the special deposit account (SDA) rate at 2.5 percent since September 2014.

During the meeting, monetary authorities lowered its inflation forecast for this year and next year due to the lower-than-expected inflation in February, the strong dollar, and the delay in the power rate adjustments.

The BSP slashed its inflation forecast to 2.1 percent instead of 2.2 percent for 2016 and to 3.1 percent instead of 3.2 percent for 2017 during its meeting last March 23.

BSP Deputy Governor Diwa Guinigundo said there was a slight adjustment in the price of Dubai crude to $32.31 per barrel instead of $31.62 per barrel this year and to $37.76 per barrel instead of $37.53 per barrel next year.

According to him, the Monetary Board continued to look at the supply and demand conditions based on reports by various global institutions.