MANILA, Philippines — Consumers already feeling the brunt of inflation likely suffered faster increases in prices in August, according to the Bangko Sentral ng Pilipinas, which sees inflation this month hitting the highest level in almost a decade.
In a statement, the BSP’s Department of Economic Research said it expects the overall increase in prices of widely-used goods and services to settle at around 5.9 percent, with a range of 5.5-6.2 percent.
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If realized, the August print will be the fastest since the 6.6 percent posted in March 2009.
The BSP’s latest estimate will also top the 5.7 percent clocked in July. In seven months, inflation averaged 4.5 percent, above the BSP’s 2-4 percent target band.
“The central forecast implies a slight deceleration of the month-on-month inflation,” the BSP unit said.
According to central bank economists, prices of rice and other key food items likely surged in August due to weather disturbances and supply disruptions.
They added that rising prices of gasoline and LPG, as well as “slight” upward adjustments in electricity rates in areas served by Manila Electric Co. contributed to the elevated inflation in August, although this could be partly tempered by lower diesel and kerosene prices and modestly appreciated peso.
Watchful
Policymakers have been concerned over rising prices this year after it slowed economic growth to a three-year low of 6 percent in the second quarter.
Inflation has particularly hit the poor as rice prices continue to surge after government stock of cheap rice they purchase was depleted and imports have not completely arrived to replenish it.
Rice is a Filipino main staple, which accounts for nearly a tenth of the consumer price index used to compute inflation. A legislative inquiry over rice supply problems is being held.
According to government data, average retail prices of regular-milled rice rose 12.76 percent, while that of well-milled rice went up 9.89 percent. Both were the fastest annual increases for the year.
Aside from dwindling rice supply, global oil prices have risen this year, translating to higher local pump prices. As of August 28, energy data showed gasoline prices rose P6.90 per liter, while that of diesel increased P7.15 per liter.
Higher fuel prices pushed power distributor Meralco, the largest in the country, to jack up power rates by 0.0265 per kilowatt hour in August.
“The BSP will remain watchful of economic and financial developments that could affect the inflation outlook and will closely monitor inflation expectations ad emergence of further second-round effects ahead of the September 2018 Monetary Board policy meeting,” the central bank said.
In a bid to fight inflation, the BSP has raised its policy rates by a cumulative 100 basis points from May to August, with the intention of discouraging bank lending, lowering money supply, and therefore tempering consumer demand that could have driven inflation higher.
Economists, however, have said that much of the inflation uptick is beyond the control of the BSP since it concerns supply constraints, particularly in rice, as well as external developments like higher oil prices.
That said, BSP Governor Nestor Espenilla Jr. earlier said inflation could peak this quarter and eventually slow down next year.
Analysts at Dutch financial giant ING Bank estimate inflation to hit 6 percent in August, adding that the current economic backdrop suggests the BSP policy tightening has further room to run.