Inflation likely breached target again in August — BSP

MANILA, Philippines – Higher liquefied petroleum gas prices and electricity costs likely pushed up inflation beyond the government’s target again in August, although this could be offset by cheaper food items, the Bangko Sentral ng Pilipinas said Tuesday.

In a statement, the BSP said it expects consumer price growth to land between 4.1-4.9% in August. If realized, the inflation print this month would be faster than 4% year-on-year clip recorded in July.

At the same time, the BSP’s projection means inflation may breach the government’s 2-4% annual target again. The Philippine Statistics Authority will release the official inflation data for August on September 7.

The central bank said much of the price upticks came from higher prices of household staple LPG, which increased by P36 per 11-kilogram tank in August based on energy department data.

Rate adjustments from Manila Electric Co., the country’s largest power distributor, also added some upward price pressures this month. Higher transmission costs lifted Meralco’s overall rate by P0.0965 per kWh in August, translating to an increase of around P19 in the total bill of a household with average monthly consumption of 200 kWh.

Cushioning the price spikes were domestic petrol prices. Energy department data showed local oil firms made four price adjustments in August, three of which were rollbacks. Prices of rice likewise fell this month, the central bank said.

If anything, economists are expecting inflation to stay elevated for the rest of the year, citing upcoming typhoons and logistics problems due to on-off lockdowns that may build some upward price pressures in the coming months. A weak peso, which makes imports more expensive, is also fueling faster price growth.

But while inflation may stay above-target this year, BSP Governor Benjamin Diokno has vowed to maintain the central bank’s ultra-loose monetary policy settings for as long as it can to help the pandemic-hit economy recover.

“Moving forward, the BSP will continue to monitor emerging price developments to help ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” the central bank said.