Inflation seen at 0.4-1.2% in November

MANILA, Philippines - The Bangko Sentral ng Pilipinas (BSP) sees inflation ranging between 0.4 and 1.2 percent for November, suggesting that it could have bottomed out in October.

BSP Governor Amando Tetangco Jr. said lower domestic oil prices of gasoline, diesel and kerosene as well as decline in rice prices likely continued to temper inflation impulses last month.

However, he explained the reported higher power rates as well as prices of selected vegetables in Metro Manila and LPG could have provided offsetting upside pressure.

“Going forward, the BSP will continue to monitor price trends and stands ready to implement measures, in line with its commitment to helping deliver price and financial stability,” Tetangco said.

The BSP has set an inflation target of between two and four percent for this year and next year.

However, the rise in prices of goods and services averaged to 1.4 percent as inflation was maintained at a record low of 0.4 percent in October amid stable food prices and cheaper utility rates.

The BSP has further lowered its inflation forecast to 1.4 percent instead of the previous projection of 1.6 percent because of the continuing softening of oil prices as well as other food prices.

Likewise, inflation forecast for 2016 was reduced to 2.3 percent instead of 2.6 percent and for 2017 to 2.9 percent instead of three percent amid the continued decline in oil and other commodity prices.

The benign inflation environment as well as sustained economic growth allowed the BSP to keep interest rates unchanged last Nov. 12. This was the ninth straight policy-setting meeting since October last year that interest rates were left untouched.

The government yesterday reported the country’s gross domestic product (GDP) grew at a faster pace of six percent in the third quarter of the year from the revised 5.8 percent in the second quarter on the back of improved government spending.

“GDP turnout confirms the economy doesn’t really need further monetary stimulus at the moment. But we are mindful of risks from natural disasters and global developments including slower than expected growth among our trading partners,” Tetangco said.

The BSP chief pointed out the country’s monetary stance remains appropriate on the back of the sustained economic growth as well as the benign inflation environment.

“Inflation is seen to have bottomed last month. As such we believe monetary settings continue to be appropriate for now. In addition to risks already mentioned we monitor commodity price developments,” he added.