BSP: Inflation in April likely below 3%

MANILA, Philippines — Inflation likely fell below three percent in April, the first time in 16 months due to declining rice prices as well as the continued strengthening of the peso, according to the Bangko Sentral ng Pilipinas.

In a statement, the BSP’s Department of Economic Research said inflation in April likely settled between 2.7 and 3.5 percent from a 15-month low of 3.3 percent in March.

The last time inflation fell below three percent was at 2.9 percent in December 2017.

“Higher domestic oil prices and the slight upward adjustment in electricity rates are seen to provide upside price pressures for the month. However, these pressures may be partly offset by the continued decline in rice prices and by the peso appreciation,” the BSP said.

Moving forward, the central bank said it would continue to closely monitor evolving price trends and undertake necessary measures toward its commitment to price stability.

Inflation has eased for five straight months after peaking at 6.7 percent in September and October, allowing the BSP to take a breather from its tightening cycle.

Inflation accelerated to 5.2 percent in 2018 from 2.9 percent in 2017 and exceeded the BSP’s two to four percent target range due to elevated oil and food prices as well as the weak peso.

The tightening cycle as well as adoption of non-monetary measures including the enactment of the rice tariffication law helped control elevated inflation.

BSP Governor Benjamin Diokno earlier tagged the prolonged El Niño weather condition, as well as higher than expected increasing global oil and food prices as possible threat to inflation.

Diokno, however, told reporters on Monday the reversal of the tightening cycle and the reduction of the level of deposits banks are required to keep with the central bank are “inevitable.”

He said monetary authorities are determining the right timing for the reduction in interest rates as well as the reserve requirement ratio (RRR).

“So as things normalize, naturally, we should move toward normalization,” Diokno said.