Inflation seen to accelerate despite fresh lockdowns in August
MANILA, Philippines — Consumer prices likely sustained a recent pick-up in August, buoyed by higher oil prices and bucking possible disruptions from 15-day lockdowns reinforced earlier in the month, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
Inflation, as measured by consumer price index, is seen to hit between 2.5%-3.3% this month, the central bank’s Department of Economic Research projected as relayed by BSP Governor Benjamin Diokno to reporters.
The forecast range is well within the BSP’s annual 2-4% target for the month, although the high-end projection, if realized, would mark the fastest since February last year. Inflation averaged 2.7% in July, the fastest in 6 months.
State statisticians will report the official August inflation data on September 4.
“Higher domestic prices of gasoline and LPG (liquefied petroleum gas) provide upward price pressure during the month,” BSP economists said.
Energy department data showed four oil price adjustments in August, mostly increases. Oil firms last tweaked local pump prices on August 25, with gasoline prices up P0.15 per liter, while diesel and kerosene prices dropped P0.15-P0.20 per liter and P0.20-P0.25 per liter, respectively.
A strong peso helped temper dollar oil import costs. On Friday, peso closed P48.485 to a dollar, the strongest since Nov. 4, 2016, continuing a winning streak against the greenback after Diokno signaled no intention to intervene in the foreign exchange market.
“These could be offset in part by the continued decline in Meralco power rates and the sustained appreciation of the peso along with broadly stable food prices,” the central bank said.
Manila Electric Co. (Meralco), the country’s largest power distributor, implemented a reduction of P0.20 per kilowatt hour on overall power charges this month, the fourth consecutive drop in power costs.
While rising in recent months, inflation is still seen by BSP to remain manageable this year, likely averaging 2.6% by yearend. This, however, was faster than the June forecast of 2.3% to close 2020.
A slow inflation on the first half of the year has given Diokno and the rest of the central bank the opportunity to lower interest rate and bank reserves in hopes of ensuring liquidity is sufficient, and consumers are enticed to borrow credit and fund economic activity.
Since February, when the pandemic has just started to unfold, the central bank had slashed policy rates by 175 basis points to new record-lows, while cutting mandated reserves by 200 bps. BSP took a “prudent pause” on its easing streak this month.
“Moving forward, the BSP will continue to monitor emerging price developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” the central bank said.
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