BSP expects April inflation to reach 8.6%

The Bangko Sentral ng Pilipinas (BSP) is expecting the April inflation to hit 8.6 percent after climbing to 8.5 percent in March as the domestic pump prices of oil went up along with the increase in rice prices.

BSP Deputy Governor Amando M. Tetangco told reporters yesterday that domestic prices were on the upswing particularly petroleum products and rice.

"There was an increase in the domestic pump prices of oil products in April so we are seeing the effects of that," Tetangco said.

On the other hand, Tetangco said the domestic prices of rice also went up, leading the increase in the prices of goods in the consumer basket.

Tetangco said April is traditionally a lean month but the increase in rice prices was global.

Tetangco said the BSP’s actual projected average inflation rate was a range of 8.1 to 8.6 percent for April, the same as the projected range for March when inflation went up to 8.5 percent.

For the whole year, the BSP is expecting inflation rate to hit 6.8 percent to 7.1 percent should the government grant the demand to increase transport fares.

The BSP said its projected baseline inflation rate for the year would be adjusted to 6.82 percent to 7.1 percent – very small adjustments compared to the original projected range of 6.79 percent to seven percent for the whole year.

The BSP’s inflation projection is critical in determining the monetary policies of the Monetary Board which bases its decision on inflation outlook for the rest of the year.

The MB had already adjusted its policy rates by 25 basis points and the market is expecting a series of measured adjustments in the coming months.

The BSP said the adjusted inflation range only reflected the immediate impact should the government approve the increase in transport fares demanded by jeepney and bus operators and drivers.

On the table is the proposed P2.50 adjustment in jeepney fares from the current P5.50 to P8 for the first five kilometers and the proposed P3 adjustment for bus fares from P6 to P9 for the first five kilometers.

According to BSP Assistant Governor Diwa Guinigundo, the immediate impact of the transport fare adjustments would be minimal but admitted there will be subsequent adjustments in the prices of commodities.

"If transport fares are increased, naturally we will see a corresponding reaction in the prices of basic commodities like vegetables, meat products and the like," Guinigundo said.

Eventually, the acceleration of price increases could fuel fresh calls for wage adjustments, completing the second-round inflationary effect that the BSP has been watching out for.

According to Guinigundo, however, there was nothing in the BSP projections that indicated further increases in oil prices that would translate to more problems down the road.

"We expect global demand to ease and supply to increase," Guinigundo said. "Our indicators suggest that oil prices will go down."

Before the calls for the transport fare adjustments, Guinigundo said the BSP’s whole year projection for the national average inflation rate was 6.79 percent to seven percent.