BSP sees June inflation ranging from 3.8% to 4.7%

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) sees inflation ranging between 3.8 percent and 4.7 percent this month due to higher school fees, an increase in the price of some food items and petroleum products.

BSP Governor Amando M. Tetangco Jr. said in a text message to reporters that inflation would still fall within the 3.5-percent to 5.5-percent target set by monetary authorities for this year.

“Forces that are likely to have dominated price movements in June are hikes in tuition fees and increases in certain food items and domestic pump prices. This forecast range for June continues to augur well for a within-target full year inflation,” Tetangco stressed.

The BSP has set an inflation target of 3.5 percent to 5.5 percent this year and three percent to five percent next year.

However, monetary authorities also decided to slash its inflation forecast to 4.7 percent instead of 5.1 percent this year and to 3.6 percent instead of 3.7 percent for next year in light of the reduction of power costs, lower oil prices, steady commodity prices, moderate liquidity growth, and the continued strengthening of the peso against the dollar.

The latest inflation forecast also took into consideration the stronger-than-expected gross domestic product (GDP) growth registered in the first quarter of the year. The country’s GDP zoomed to its fastest pace in almost three years after expanding by 7.3 percent in the first quarter of the year from only 0.5 percent in the same quarter last year. 

Latest data from the National Statistics Office (NSO) showed that the average inflation eased to 4.3 percent in the first five months of the year from 5.7 percent in the same period last year. Headline inflation eased to 4.3 percent in May from 4.4 percent in April on the back of cheaper oil, power, and water rates.

Based on the latest assessment of the BSP during their meeting last June, monetary authorities believe inflation would no longer hit a high of six percent either in June or July due to a possible wage increase, fare hike, and rising pump prices of petroleum products.

Tetangco said monetary authorities would carefully assess the impact of the developments in Europe and Korea on the domestic demand and whether these factors would result in price action in the local markets.

“Nevertheless, we remain mindful of developments in Europe and their impact on capital flows. We will monitor how these would affect volatilities in commodity and other economic prices, and ultimately on the inflation outlook,” the BSP chief stressed.

The BSP decided to keep its rate unchanged at record lows last June 3 but decided to put on hold the further lifting of liquidity enhancing measures that were put in place way back in November of 2008 to cushion the impact of the global financial crisis on the domestic economy.

The body has kept its rates unchanged for eight consecutive policy-setting meetings since July last year.