Inflation hits 4.9% in August

MANILA, Philippines - Inflation stayed near the upper end of the Bangko Sentral ng Pilipinas’ target for the second straight month inAugust, the Philippine Statistics Authority (PSA) reported yesterday.

The PSA said inflation stood at 4.9 percent in August, or the same pace as in July and the highest in 30 months.

Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said the latest inflation figure was within the central bank’s 4.7 to 5.5 percent forecast range for August.

The August inflation brought the eight-month average to 4.4 percent, which is still within the government’s full-year target range of three to five percent.

 “We will consider this as well as movements in core inflation which rose to 3.4 percent from three percent in July, and  other developments on the local/external front at our meeting next week, to see if there is need to make further adjustments to policy settings so as to keep inflation expectations well-anchored,” Tetangco said.

Without the volatile food and fuel prices, core inflation hit a 17-month high of 3.4 percent last month.

The central bank in July raised key policy rates to ensure inflation expectations will remain within the target range. The move also came ahead of an expected normalization in monetary policy in advanced economies.

The inflation the rate in the National Capital Region accelerated to 4.4 percent in August from 3.9 percent in July. Areas outside the NCR, meanwhile, saw the rate slow down to five percent from 5.1 percent.

By commodity group, the food and non-alcoholic drinks index quickened to 8.3 percent in August from 8.2 percent in the previous month, while the housing, water, electricity, gas and other fuels index increased to 2.7 percent from 2.4 percent.

The clothing and footwear index went up to 3.4 percent from 3.3 percent, while the health index also accelerated to 3.3 percent from 3.2 percent. The furnishing and household equipment index also climbed to 2.7 percent from 2.6 percent.

Rahul Bajoria, economist at Barclays, said they expect the BSP to deliver another 25-basis-point hike in key policy rates to keep next year’s inflation within the two to four percent band.

 “The BSP has begun its tightening cycle as it seems concerned about inflation expectations, which it believes have been rising. Amid stable growth, we think the impact of the recent rate hike would only be felt in 2015, when the BSP’s inflation target range is lowered to two to four percent, and it would need to keep inflation in check while supporting growth,” Bajoria said in a research note.