Inflation eases in August

MANILA, Philippines – Inflation eased to 1.8 percent in August from 1.9 percent in July due to slower increases in prices of food, non-alcoholic beverages, as well as recreation and culture, the Philippine Statistics Authority (PSA) reported yesterday.

“The relatively low and manageable inflation environment during the first eight months is expected to continue for the rest of the year as risks around the inflation projections are considered to be low,” Socioeconomic Planning Secretary Ernesto Pernia said.

“We are thus expecting full-year inflation to be close to the lower end of government’s target of two to four percent,” he added.

For his part, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said there is no need to tweak the country’s policy stance amid the benign inflation environment.

Tetangco said the August inflation was well within the forecast range of 1.6 to 2.4 percent, bringing the average inflation for the first eight months to 1.5 percent.

The central bank has set an inflation target of between two and four percent for this year until 2018.

“These are consistent with our view that inflation remains manageable and will move to within forecast by 2017-2018. There therefore appears to be no strong need to change stance of policy,” Tetangco said.

The benign inflation environment and robust domestic demand allowed the BSP to keep its policy stance unchanged since September 2014.

Economic managers penned a gross domestic product (GDP) growth of between six and seven percent this year after slowing down to 5.9 percent last year from 6.1 percent in 2014 due to weak global demand and low government spending.

The economy expanded by 6.9 percent in the first half after a growth of seven percent in the second quarter.

However, the BSP chief said monetary authorities would continue to monitor external developments such as the impact of the impending interest rate hike in the US as well as the effects of weather disturbances in the domestic front.

“But we are mindful of possible weather-related supply disruptions as well as financial market volatilities from investment rebalancing. We will make adjustments as needed,” Tetangco said.

Core inflation, which excludes selected food and energy items, rose to two percent in August from 1.9 percent in July and 1.6 percent a year ago.

Inflation in the National Capital Region (NCR) eased to 1.2 percent in August from one percent in July, while the consumer price index in areas outside NCR eased to two percent from 2.1 percent.

Data showed lower annual increases were posted in the indices of food and non-alcoholic beverages and recreation and culture at 2.4 percent and 1.7 percent, respectively.

The annual gain of the food index eased to 2.5 percent in August from 2.8 percent in July.

Eugenia Victorino, economist for South and Southeast Asia at ANZ, said inflation would average 1.9 percent this year before picking up to three percent in 2017.

The BSP slashed its inflation forecast to 1.8 percent instead of two percent this year and to 2.9 percent instead of 3.1 percent next year. – With Czeriza Valencia