Inflation steadies at 1.1% in April

Well within BSP’s target range

MANILA, Philippines - Inflation was steady at 1.1 percent in April as cheaper food prices managed to offset the uptick in utility rates, the Philippine Statistics Authority (PSA) reported yesterday.

The inflation turnout was the same rate recorded in March and was well within the 0.7 to 1.5 percent projection set by the Bangko Sentral ng Pilipinas (BSP) for April.

Last month’s inflation was also lower compared to the 2.2 percent recorded in April last year.

The BSP has set an inflation target of between two and four percent for this year and next year. Inflation averaged 1.1 percent in the first four months from 2.4 percent in the same period last year.

Higher annual mark-ups were registered in the indices of alcoholic beverages and tobacco in the Philippines at 5.2 percent in April; clothing and footwear, 1.9 percent; health, 2.2 percent; recreation and culture, 1.3 percent; and restaurant and miscellaneous goods and services, 2.1 percent.

Meanwhile, the annual increment in furnishing, household equipment and routine maintenance of the house index slowed down to 1.4 percent.

These were pushed up by the seasonal factors such as the production of selected goods for the graduation season and higher demand for construction materials during summer months.

The annual change in the country’s food index climbed 1.7 percent in April from 1.6 percent in March and four percent in April last year.

Annual upticks were higher in the indices of corn at 2.7 percent; other cereals, flour, cereal preparation, bread, pasta and other bakery products, 1.3 percent; meat, 1.8 percent; oils and fats, 1.2 percent; fruits, 3.9 percent; and vegetables, 9.6 percent.

On the contrary, the rice index continued to post annual decrease at 1.3 percent.

Eugenia Victorino, economist at Australia and New Zealand Banking Group Ltd, said inflation remained soft in April due to the continued decline in rice prices amid the El Niño weather disturbance.

“However, the pre-emptive importation of rice masks the upside trajectory of prices of locally produced vegetables and fruits reflecting a prolonged El Niño. Nonetheless, our inflation outlook remains comfortably within the central bank’s target range,” she said.

Victorino added benign inflation would give enough room for the central bank to manage the transition to an interest rate corridor (IRC) policy framework over the coming weeks.

“Though BSP expects a policy neutral transition, we reiterate our view that the volume of the new auction of the term deposit facility will be key in maintaining the current policy stance. We continue to pencil in rate tightening to commence in Q4 2016, taking the cue from the US Federal Reserve,” she said.

 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.

The next policy-rate setting meeting of the BSP is on May 12.