By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) said inflation for the month of November could be higher than October’s 0.8 percent due to increased power rates and gasoline prices.
In a statement Friday, the central bank’s Department of Economic Research forecasts a November inflation range of 0.9 percent to 1.7 percent.
According to the DER, the “increase in electricity rates as well as higher prices of gasoline, LPG, and selected food items are seen as the primary sources of upward price pressures for (November).”
But, inflation could still hit below one percent partly because of the strength of the local currency. “(The) inflation could be tempered by lower domestic rice prices and the appreciation of the peso.”
DER said the BSP will “remain watchful of evolving inflationary conditions to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate.”
The BSP as of November 14 has a 2019 inflation forecast of 2.5 percent, and 2.9 percent for 2020 and 2021.
On November 14, during its seventh Monetary Board policy meeting for the year, the BSP decided to pause and kept the benchmark rate at four percent.
BSP Deputy Governor Francisco G. Dakila Jr. said the prevailing monetary policy settings remain appropriate, and that benign inflation outlook and “firm” domestic economic growth outlook has allowed the BSP to keep rates steady.
Recent pronouncements by BSP Governor Benjamin E. Diokno however hinted that with just one Monetary Board policy meeting scheduled for the year, which is on December 12, the BSP may decide to cut rates one last time.
So far, the policy rates have been reduced by a total 75 basis points this year.
Dakila reiterated that inflation which dropped to 0.8 percent in October and currently averages at 2.6 percent year-to-date, has bottomed out in October.
He expects the rate to “move closer to the mid-target in 2020 and 2021 as baseline effects begins to dissipate” with the tapering off of the impact of the rice tarrification and the acceleration of domestic growth.
Inflation upside risks remain the same, primarily the impact of the African Swine Fever on food prices and the potential volatility in oil prices amid geopolitical tensions in the Middle East, said Dakila. He also said that the “weak global economic prospects continue to temper the inflation outlook as uncertainty over trade policies weigh down on global economic activity and demand.”