BSP sees December inflation at 2.9% to 3.6%

MANILA, Philippines — The Bangko Sentral ng Pilipinas (BSP) expects inflation to hover at 3.2 percent this year with the consumer price index ranging between 2.9 and 3.6 percent this month due to higher oil and rice prices.

“Higher domestic petroleum and rice prices could contribute to upward price pressures, which could be partly offset by the decline in Meralco’s electricity rates and stronger peso,” the BSP’s Department of Economic Research said.

Pump prices of petroleum products continue to rise while residential customers of Manila Electric Co. are expected to pay 37.85 centavos less per kilowatt-hour this month due to the stronger peso and lower spot market prices.

Inflation eased to 3.3 percent in November after leaping to a three-year high of 3.5 percent in October, bringing the average inflation to 3.2 percent in the first 11 months.

The BSP has set an inflation target of two to four percent between 2017 and 2018.

“The forecast range brings full year 2017 inflation to average at 3.2 percent, well within the target for the year,” the BSP said.

Inflation has been picking up to 1.8 percent in 2016 after hitting a record low of 1.4 percent in 2015 due to the marked decline in global oil prices.

Although there are risks to the inflation outlook, BSP Governor Nestor Espenilla Jr. said the latest projections continue to indicate the consumer price index would settle within the two to four percent range.

“Moreover, the inflationary impact of the potential increases in international commodity prices is assessed to be moderate, supported by lower pass-through to inflation of exchange rate and external commodity price inflation,” he said.

According to Espenilla, the favorable effect of sustained investment spending by the national government on the economy’s productive capacity would help temper inflation pressures.