Inflation likely peaked at 3.4% for year – BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) said inflation has already reached its peak  at 3.4 percent this year amid the decline in oil prices and the moderation in commodity prices.

“It may have likely peaked already when it hit 3.4 percent,” BSP Deputy Governor Diwa Guinigundo said.

Inflation eased to a five-month low of 2.8 percent in June from 3.1 percent in May, bringing the average to 3.1 percent in the first half. Inflation was recorded at 3.4 percent in March and April and has been on a downward path since then.

Based on the forecasts made by the BSP. Guinigundo said inflation could still hit 3.4 percent in August.

“Still uncertain given the decline in oil prices and commodity prices in general have been moderate,” Guinigundo said.

He said rice prices that account for about nine percent of the total consumer basket would remain steady as importation by the state-run National Food Authority (NFA) and activation of the minimum access volume (MAV) at 805,200 metric tons.

He pointed out baseline inflation projections are lower and closer to the midpoint of the two to four percent target set by the BSP.

“On the basis of our assessment on the factors driving inflation as well as base effects that we experienced last year and carried over 2017. There’s nothing at this point that can upset the path of inflation at this point,” he said.

BSP Governor Nestor Espenilla Jr. said both food and non-food inflation were generally steady as headline inflation averaged 3.1 percent in the second quarter from 3.1 percent in the first quarter.

Espenilla said the economy grew 6.4 percent in the first quarter, albeit slower than the 6.6 percent expansion booked in the fourth quarter.

He added global economic activity continued to improve with the sustained expansion in the US, Euro area, and China but slower growth noted in Japan and China.

The BSP chief said investor sentiment remained buoyant on the back of optimism over the country’s sustained growth in the first quarter as well as the proposed tax reform program of the Duterte administration despite the uncertainty stemming from the continuing normalization of US monetary policy as well as volatility in international oil prices.

Espenilla, who is scheduled to preside over his first rate-setting meeting as chairman of the Monetary Board on Aug. 10, said current monetary policy settings remain appropriate.

“The inflation path is also lower due in part to the decline in global crude oil prices, the moderation in domestic growth momentum, and the recent appreciation of the peso,” he said.