Lower oil, power, transport costs: Inflation forecast at 0.8-1.6% in January

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) sees inflation for this month averaging between 0.8 and 1.6 percent amid the minimum fare rollback for jeepneys and cheaper power rates.

BSP Governor Amando Tetangco Jr. said the continued softening in oil prices helped offset the rise in rice prices and the annual adjustment in excise taxes for cigarette and liquor.

“The decline in power rates, lower domestic oil prices, and downward adjustment in the minimum jeepney fare could offset the slight uptick in rice prices as well the annual sin tax adjustments,” he said.

Inflation eased to a 20-year low of 1.4 percent last year from 4.1 percent in 2014 on the back of stable food prices and cheaper utility rates.

“Going forward, the BSP will continue to monitor closely evolving price conditions in line with the BSP’s commitment to price stability conducive to balanced and sustained economic growth,” Tetangco said.

Earlier, BSP Deputy Governor Diwa Guinigundo said the country’s current monetary policy settings remain appropriate as inflation is projected to return gradually to the two percent to four percent target for 2016 and 2017.

Guinigundo said upside risks to inflation include the pending petitions for power rate adjustments and the impact of protracted El Niño weather conditions on food prices and utility rates, while the continued weakness in the global economy serves as the key downside risk to inflation.

Guinigundo said the domestic economic activity continues to expand at a solid pace, while credit and liquidity growth remains in step with the overall requirements of the economy.

The BSP adjusted its inflation forecasts to 2.4 percent instead of 2.3 percent for 2016 and to 3.2 percent instead of 2.9 percent for 2017 last month.

It is expected to release a new inflation forecast for 2016 and 2017 during its scheduled first policy-setting meeting on Feb. 11.