The Finance Department said Wednesday inflation rate likely accelerated to 3.4 percent in September from 3.1 percent in August, driven by higher prices of food, fuel and power.
“Inflation rate in September likely crept to 3.4 percent, up by 0.3 percentage point as compared to August. Weather disturbances caused price increases in food items, especially vegetables,” the department said in its latest economic bulletin on inflation.
“Fuel price hikes and power rate increases contributed the increase in the non-food commodity group,” it said.
The Bangko Sentral ng Pilipinas said inflation in September likely accelerated to as high as 3.6 percent from 3.1 percent in August on higher prices of fuel, weaker peso and increased power rates.
The Bangko Sentral said inflation likely settled within the 2.8 percent to 3.6 percent range.
Inflation in the first eight months averaged 3.1 percent, higher than the midpoint of the target range of 2 percent to 4 percent for the year.
A manageable inflation environment and robust domestic economic growth prompted the Monetary Board of Bangko Sentral to maintain the current policy settings steady in its meeting on Sept. 21, 2017.
It maintained the interest rates at 3.5 percent for overnight lending, 3 percent for overnight borrowing, and 2.5 percent for deposit facilities. The reserve requirement ratios were also retained.
Bangko Sentral Governor Nestor Espenilla Jr. said the board’s decision was based on its assessment that the inflation environment remained manageable.
“Latest forecasts show that the future inflation path will continue to be within the target range for 2017-2019.
Meanwhile, inflation expectations remain firmly anchored close to the midpoint of the government’s 2 to 4 percent over the policy horizon,” Espenilla said.
Espenilla also said while the proposed tax reform program might exert potential transitory pressures on prices, various social safety nets and the resulting improvement in output and productivity were also expected to temper the impact on inflation over the medium term.
The board also maintained the inflation average forecast this year and next at 3.2 percent. But the forecast for 2019 was adjusted upward to 3.2 percent from the earlier estimate of 3.1 percent.
Deputy Governor Diwa Guinigundo said the adjustment in inflation forecast for 2019 considered four factors. These are the weakening peso, uptick in oil prices in the global markets, high liquidity condition, and the recent adjustment in daily wages in Metro Manila.
“The impact on inflation of the wage adjustments could be felt in the latter part of the year,” Guinigundo said.
Earlier, ING Bank Manila senior economist Joey Cuyegkeng said there was no compelling reason for Bangko Sentral to change its policy stance as inflation remained within the target range and favorable economic growth prospects persisted.
The economy grew 6.4 percent in the first half, on higher fiscal expenditures, robust domestic demand and investments.
Economists predicted that growth would be more robust in the second half as the government ramped up spending, particularly on infrastructure under the “Build, Build, Build” program.
Cuyegkeng said favorable inflation and economic activity data and prospects would allow the Bangko Sentral to utilize the leeway that these data implied by keeping policy settings steady.
Inflation averaged 1.8 percent in 2016.
