Read this in The Manila Times digital edition.
THE Bangko Sentral ng Pilipinas (BSP) said on Friday the country’s headline inflation rate likely rose to 4.3 percent in July, a two-month-high.
July’s point inflation projection, according to BSP Governor Benjamin Diokno, was within the central bank’s estimated range of 3.9 to 4.7 percent for the month.
The outlook is higher than the 4.1-percent increase in June but lower than the 2.7-percent print a year ago.
If accurate, the forecasted rate would be the fastest in two months or since May’s 4.5 percent.
The Philippine Statistics Authority will issue official July inflation data on Aug. 5, 2021.
“Higher prices of domestic petroleum products and key food items, along with the upward adjustment in Meralco electricity rates and a weaker peso, are the main sources of upward price pressures for the month,” Diokno explained.
According to the Department of Energy, local oil companies have raised fuel prices three times this month.
In July, Meralco, or Manila Electric Co., hiked the cost per kilowatt-hour (kWh) for households consuming 200 kWh per month by P0.2353.
The peso has depreciated by 4.62 percent against the US dollar year-to-date, closing at 50.35:$1 on July 21, 2021, softer from P48.02:$1 at the end of December 2020, the Bangko Sentral has reported.
“Moving forward, the BSP will continue to monitor emerging price developments to ensure that its primary mandates of price stability conducive to balanced and sustainable economic growth is achieved,” Diokno also remarked.
As the peso remains weak and persistent food inflation keeps price pressures elevated, senior economist Nicholas Antonio Mapa of ING Bank Manila said in a commentary released after the central bank’s statement that inflation is now expected to breach the upper end of the Bangko Sentral’s 2- to 4-percent target.
“Despite the projected inflation breach, we do not expect BSP to recalibrate rates in the near term with Governor Diokno likely looking past the cost push driven acceleration,” he added.
Mapa warned that raising policy rates at a time when the country’s gross domestic product is forecast to fall below the official objective of 6 to 7 percent would jeopardize the country’s fragile growth prospects.
Furthermore, he said tighter policy will have little to no impact on containing the rise in global crude oil prices, or the cost of canned goods, rendering rate adjustments pointless at this time, if not to stifle growth and impose even more suffering in the country.
Inflation is projected to stay elevated during the next months due to a weaker currency, higher energy costs and pricey food items with the central bank’s 4-percent outlook plainly under threat, according to the analyst.
“BSP, however, will likely look past the breach given its supply side nature while providing the economy as much support as it can muster amid the current protracted economic downturn,” he added.