February inflation at 2-year high-BSP

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) expects inflation to exceed three percent this month – the highest level in more than two years – due to rising pump prices of petroleum products, fare hikes, and more expensive electricity rates.

BSP Governor Amando Tetangco said inflation would likely range between 3.1 and 3.9 percent for February, up from 2.7 percent in January.

“The BSP forecast suggests that February inflation could settle within the 3.1 to 3.9 percent range. The increase in domestic petroleum prices, jeepney and taxi fares, and electricity rates of Meralco-serviced areas could exert upside pressures to inflation during the month,” Tetangco said.

If realized, the consumer price index for February will be the highest since November 2014 when inflation stood at 3.7 percent.

Inflation has been climbing for the past three months to 2.7 percent in January from 2.6 in December, 2.5 percent in November, and 2.3 percent in October due to rising food and oil prices. The consumer price index hit the bottom at a record low of 0.4 percent in September and October of 2015 amid plunging oil and food prices.

The Land Transportation Franchising and Regulatory Board (LTFRB) approved the P1 increase on minimum fares for jeepney and at the same time reverted the base fare for taxis to P40 this month.

Meralco also announced an increase in the overall rate for residential customers by 92 centavos per kilowatt hour, bringing the rate to P9 per kWh.

Tetangco believes the sharp rise in consumer prices in February would be temporary. “Nonetheless, the uptick in the projected inflation is seen to be temporary as upside pressures are largely supply-side in nature,” he said.

The BSP has set an inflation target of between two and four percent from 2017 to 2020.

Last Feb. 9, the BSP raised the inflation forecast to 3.5 percent instead of 3.3 percent for this year and to 3.1 percent instead of three percent for 2018.

Monetary authorities took into consideration the higher oil prices, the depreciation of the peso against the dollar in the fourth quarter, the minimum wage adjustment in June as well as the firm domestic demand.

“Moving forward, the BSP will continue to monitor closely emerging price conditions to ensure price stability conducive to a balanced and sustainable economic growth,” Tetangco said.

Economic managers reported a gross domestic product (GDP) growth of 6.5 to 7.5 percent this year after accelerating to 6.8 percent last year from 5.9 percent in 2015 due to robust domestic demand and strong investments growth.

The country’s robust economic growth and benign inflation environment has allowed authorities to maintain its ‘dovish’ monetary policy stance.