Power rate hike TRO reins in inflation in 2013, says BSP

MANILA, Philippines - Inflation this year could be lower than earlier anticipated following the Supreme Court’s issuance of a temporary restraining order on Manila Electric Co.’s record high rate hike.

The Bangko Sentral ng Pilipinas last month forecast inflation to average 4.5 percent this year but Deputy Governor Diwa C. Guinigundo told reporters the power rate increase was factored in the figure.

Since Meralco’s record-high P4.15 per kilowatt-hour (kWh) adjustment has been put on hold by the Supreme Court, the full-year inflation forecast may be revised downward by the central bank.

“In other words, our previous forecast of 4.5 percent for 2014 and 3.2 percent for 2015 will have to change,” Guinigundo said.

The high court handed down a 60-day temporary restraining order on Meralco’s rate adjustment for December, even as it stated the P4.15/kWh-increase will be implemented in tranches.

Of the total power rate hike, P2.41/kWh was planned for December, P1.21/kWh for February, and P0.53/kWh for March.

Guinigundo explained that as the Supreme Court is still threshing out the petitions against the rate hike, inflation could settle at a lower level than previously expected.

The BSP’s policymaking Monetary Board last Dec. 12 revised its 2014 inflation forecast to 4.5 percent from an earlier four percent on the back of Meralco’s power rate adjustment, expected higher oil prices and also the impact of recent calamities on food prices.

The 4.5 percent is near the upper end of the central bank’s three to five percent target range for the year.

Inflation last year averaged three percent last year, the low end of the three-to five-percent target range.