Inflation seen subdued in April

MANILA, Philippines — Inflation likely remained less of the worries of policymakers this month as a global oil price slump far offset a slight increase in food and utility prices, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

In a Viber message to reporters, BSP Governor Benjamin Diokno relayed that the central bank’s department of economic research sees consumer prices rising between 1.9-2.7% this month. 

Official inflation report will be released May 5. During the first quarter, inflation, as measured by the consumer price index, averaged 2.7%, well within BSP’s 2-4% target this year.

“The collapse in oil prices is expected to moderate inflationary pressure coming from higher prices of rice and other food items along with upward adjustments in electricity rates…,” Diokno told reporters.

Early this month, US oil prices sagged to negative territory, indicating refiners are willing to pay crude buyers just to take overwhelming supply out of their packed storage facilities. Prices had since recovered, but has so far hovered to record-lows.

That drop in US oil costs was followed by Asian benchmarks, albeit at a more tempered scale, which in turn pushed down local pump prices. As of April 10, gasoline prices were slashed an average of P14.52 per liter, P13.94 per liter of diesel, and nearly P20 per liter of kerosene, energy data showed.

The decline in oil prices came before the Manila Electric Co. (Meralco), the country’s largest power distributor, announced last April 9 power bills of typical households consuming 200 kilowatt per hour would go up by roughly P21 this month.

Electric bills went up after Meralco implemented a slight upward adjustment worth P0.105 per kWh on universal charge rate slapped on its franchise area covering Metro Manila, Bulacan, Rizal, Cavite and parts of Laguna, Batangas and Pampanga.

Going forward, Diokno said “the progressive fall in inflation will continue,” a scenario that has allowed the central bank to loosen up monetary controls and address the economic impact of the pandemic.

Over the past two months, Diokno oversaw a 100-basis-point cumulative reduction on policy rates, which are used by banks to benchmark their loan rates. The cut on the key rate to 2.75% was meant to encourage consumers and investors to borrow funds to boost the economy.

Apart from slashing interest rates, the central bank also freed up around P200 billion in credit for more lending after it lowered bank reserves by 200 bps to 12% late last March.

“Looking ahead, BSP will remain watchful of economic and financial developments here and abroad to ensure that monetary policy settings remain consistent with price stability conducive to a balanced and sustainable economic growth,” Diokno said. — Prinz Magtulis