August inflation seen at 2.7%

MANILA, Philippines - Inflation is expected to have risen slightly to 2.7 percent in August due to the peso’s depreciation and possible supply disruptions following the recent typhoon and monsoon rains.

“Inflation to rise on weaker PHP (Philippine peso) and possible disruptions from recent typhoon,” Barclays said in a research note.

The level is faster than July’s 2.5 percent, and is at the higher end of the Bangko Sentral ng Pililipinas’ 1.9 to 2.7-percent forecast range for August.

The country saw the peso depreciate to levels lowest in nearly three years as investors await the US Federal Reserve’s action on its bond-buying program.

The peso closed P44.75 per dollar last Aug. 28, its lowest level since Sept. 2, 2010, when it finished P44.95 to a dollar.

At the same time, Typhoon Labuyo, and monsoon rains enhanced by Tropical Storm Maring hit the country last month, resulting in some deaths and bringing damage to infrastructure and to agriculture crops.

This may have led to disruptions in the supply chain as the weather disturbances may have caused shortages or delay in transportation of goods.

August inflation data is set to be released on Thursday.

The BSP last week said inflation is expected to have remained benign in August despite the typhoons, peso weakness and a rise in pump prices amid geopolitical risks abroad. The central bank also noted lower electricity rates could have tempered inflation last month.

Inflation already averaged 2.9 percent in the seven months to July, below the central bank’s full-year target range of three to five percent.

BSP Governor Amando M. Tetangco, Jr. said last week the central bank would continue to monitor factors affecting inflation to ensure economic growth is sustained.

The central bank has kept its overnight borrowing and lending rates at 3.5 percent and 5.5 percent, respectively, since the start of the year as inflation outlook remains manageable and as the economy continues to be robust.

The BSP’s Monetary Board is set to revisit policy settings on Sept. 12.