Socioeconomic Planning Secretary and NEDA Director General Romulo Neri said over the weekend that, although minimal, the continued weakness of the peso would have an impact on inflation if sentiments do not improve soon enough.
According to Neri, the worsening market sentiments would add fuel to seasonal pressures that normally create an upward pressure on prices during the lean months of July, August and September.
"All these speculation about political issues in the market is not doing anyone any good," Neri said. "People should realize that the ultimate impact of these disruption is on the lower income segment of the economy."
Neri said it was not surprising for the market to react adversely to the court decision suspending Bangko Sentral ng Pilipinas Rafael B. Buenaventura.
"Mr. Buenaventura is very credible in the domestic and international market, he has done a good job and he is perceived as very independent," Neri said. "Under his leadership, the powers of the Bangko Sentral ng Pilipinas (BSP) have been used very judiciously and this is one aspect that the market as well as the banking industry has formed its confidence on."
The threat of a one-year suspension, according to Neri, would create uncertainty in the market where monetary policies are concerned.
On the other hand, Neri said inflationary pressures would be tempered by recent developments that have led to the subsiding fears of another coup attempt.
The NEDA chief said the biggest pressure was coming from the recent weakening of the peso against the dollar which could translate to adjustments in the prices of oil and oil products as well as other imported or import-based basic commodities in the food basket, such as flour and milk.
"Because of these factors, we expect inflation to be three to 3.5 percent in August," Neri said. At the high-end of the range, it would be the highest inflation rate since May 2002.
In July, the inflation rate was virtually unchanged at 3.3 percent, rounding up the seven-month inflation rate to three percent on the back of stable food prices.
The BSP itself observed that despite the increase in electricity costs and the effects of the series of typhoons that disrupted supply flows, the recovery of food prices were able to offset the increase in the prices of the other items in the consumer price index.