BSP sees subdued inflation persisting in September
MANILA, Philippines — Consumer prices likely remained cool in September on the back of lower electricity costs and depressed oil and food prices, economists at the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.
Inflation, as measured by consumer price index, was estimated to hit between 1.8% and 2.6% this month, the BSP’s Department of Economic Research said in a statement.
Inflation has so far been within policymakers’ expectations this year, averaging 2.5% for the first 8 months and falling at the low end of the central bank’s 2-4% target for the year. Latest forecasts assume that trend to have persisted, even with the likelihood of inflation slightly picking up pace from 2.4% in August.
State statisticians will report official September inflation data on October 6.
“Lower rice and oil prices as well as Meralco power rates, along with the continued appreciation of the peso are expected to be the primary sources of downward price pressures for the month,” BSP said.
Energy department data showed five oil price adjustments in September, which were a mix of decreases and increases. Oil firms last tweaked local pump prices on September 25, with gasoline prices up P0.20 per liter, while prices of diesel and kerosene rose P0.05 per liter and P0.45 per liter, respectively.
That said, oil prices have remained subdued so far this year, thanks to a strong peso that has gained the most among its Southeast Asian peers. On Wednesday, the peso closed nearly flat at P48.5 to a greenback.
On top of lower oil costs, Manila Electric Co., the country’s largest power distributor, likewise implemented another round reduction in power rates this month, the fifth straight month of decline.
“These could be partly offset by the slightly higher price of LPG (liquefied petroleum gas),” the BSP said. Data showed cooking gas prices spiked by P0.15-P0.18 per kilogram this month.
A benign inflation has presented BSP opportunity to bring benchmark bank rates to historic-lows this year, meant to encourage bank lending and spending in a bid to recharge the economy from the pandemic’s wrath.
Since February, when the health crisis has just started to unfold, the central bank had slashed policy rates by 175 basis points, while cutting mandated reserves by 200 bps. BSP took a “prudent pause” on its easing streak in August. BSP will meet to set policy again on Thursday.
“Moving forward, the BSP remains watchful of economic and financial developments, and stands ready to take necessary policy actions to ensure the delivery of its primary mandate of price stability conducive to a balanced and sustainable economic growth,” the central bank said.