Inflation seen to ease further

MANILA, Philippines - Better conditions in Metro Manila’s ports may lead to a “more moderate” inflation for the rest of the year, the Bangko Sentral ng Pilipinas said yesterday.

“The more decisive resolution of these supply pressures will hopefully provide greater momentum to more moderate inflation towards the end of the year,” BSP Deputy Governor Diwa C. Guinigundo told reporters.

Inflation eased to 4.4 percent in September from 4.9 percent in August and in July amid lower increases in food prices and of housing and utility rates.

Manila City Mayor Joseph Estrada has lifted a seven-month long truck ban, which has been repeatedly blamed for the delay in the delivery of goods, adding to tight supply conditions and affecting the country’s trade activities.

However, Guinigundo said the upside risks to inflation remain especially the pending petitions for adjustment in power rates.

“But this will be countered by downside risks such as the slowing global growth that will lower the demand and prices of commodity, the easing of the port congestion, the arrival of the rice imports, and the start of the harvest season later this year,” Guinigundo said.

The central bank expects inflation to average 4.5 percent this year and 3.8 percent in 2015. Both forecasts are within the BSP’s three to five percent target this year and the two to four percent band for 2015.

Guinigundo said the BSP will continue to monitor inflation and expectations for the rate as it remains among the considerations tackled when the Monetary Board revisits the policy settings.

“We don’t just look at what happened this month or what will happen next month. We take a look at what will happen to inflation for the next year and two years from now,” Guinigundo said.

“Monetary policy works in a long and variable lag,” he added, stressing that actions should be taken swiftly once the inflation path is seen remaining elevated.

The Monetary Board earlier raised the key policy rates by 50 basis points to ensure inflation will remain within the target ranges for this year and the next.