Price freeze on basic goods to keep inflation low in September

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) expects inflation to hover between 1.6 and 2.4 percent this month amid the prize freeze implemented by the Department of Trade and Industry (DTI) on basic commodities.

BSP Governor Amando Tetangco Jr. said authorities observed lower power rates in areas serviced by Manila Electric Co. as well as lower domestic diesel and kerosene prices this month.

He also cited the implementation of prize freeze by the DTI after the Duterte administration declared a “state of lawlessness” after 15 people were killed in an explosion in Davao City last Sept. 2.

“In addition, prices of selected basic commodities are covered by the price freeze implemented by DTI,” Tetangco said.

The BSP chief said a slight price uptick in rice and higher domestic LPG prices were noted along with the weaker peso.

“However we also noted a slight price uptick in rice and higher domestic LPG prices along the weaker peso, which could cause some upward price pressures,” he added.

Inflation eased to 1.8 percent in August from 1.9 percent in July due to slower increases in the indices for food and non-alcoholic beverages as well as recreation and culture.

This brought the average inflation to 1.5 percent in the first eight months of the year or below the two to four percent target set by the BSP.

The BSP earlier lowered its inflation forecast to 1.7 percent instead of 1.8 percent this year but retained next year’s target at 2.9 percent and 2.6 percent for 2018.

“The BSP stands ready to implement necessary policy actions to maintain price stability conducive to balanced and sustainable economic growth,” Tetangco said.

The country’s gross domestic product (GDP) growth accelerated to seven percent in the second quarter from 6.8 percent in the first quarter amid strong boost from election related spending.

The GDP expanded 6.9 percent in the first half from 5.5 percent in the same period last year. Economic managers penned a GDP growth target of between six and seven percent for this year.

Last Thursday, the BSP kept interest rates unchanged due to robust domestic demand and the benign inflation environment.