BSP: Strong peso to keep inflation rate, fuel prices manageable

The Bangko Sentral ng Pilipinas (BSP) said the sturdy peso will keep the inflation rate and pump prices within manageable levels for the rest of the year.

BSP deputy governor Diwa Guinigundo noted that while Dubai crude prices rose 39.89 percent year-on-year up to Aug. 6, the hefty increase did not reflect on domestic pump prices, and instead, the adjustment averaged just 27.78 percent for kerosene, 21 percent for diesel and 22 percent for gasoline.

Moreover, the price of LPG, considered a socially-sensitive product, even dipped by three percent during the period.

As of the first week of August Dubai crude was at $72.24 per barrel, from $68.22 last July 5 and $59.76 last Jan. 25.

A BSP report said international spot prices rose as crude, gasoline and distillate fuel inventories fell following the shutdown of a major pipeline in Alaska.

During the same period, domestic pump prices of gasoline and LPG increased to P44.18 per liter (from P42.80 last July 5) and P24.53 per liter (P23.27 last July 5), respectively. Kerosene and diesel prices also increased to P41.77 (from 40.27 last July 5) and P37.74 per liter (P36.24 last July 5), respectively.

Guinigundo said the increase in pump prices was tempered because of the strong local currency.

"If the peso will continue to improve for the rest of the year and the Middle East conflict is temporarily resolved through a ceasefire, the expected easing of inflation will take place," he said.

He added that if the peso continues to be steady at such levels, the outlook for inflation for the rest of the year and in 2007 would remain within target.

The BSP inflation forecast is 6.9-7 percent for the year, lower than original projection of 7.3-7.6 percent.

Last Friday, the peso closed at a four-month high of 51.11 to $1. The peso strengthened with worries over US interest rates tapering after the better-than-expected US inflation data released recently.

Market analysts said the peso’s momentum is strong and will probably test the psychological support of 50 to $1 by September to December, when the seasonal inflows from overseas workers exceed targets.