Monetary officials have forecast August’s inflation rate to stay between 2.5 percent and 3.3 percent in line with their within-target inflation rate projection until 2022.
Bangko Sentral Gov. Benjamin Diokno said upside risks to inflation are the hikes in the domestic prices of gasoline and liquified petroleum gas.
However, these are expected to be countered partly by the drop in power rates in areas being serviced by the Manila Electric Co., the continued appreciation of the peso against the US dollar, and stable food prices.
“Moving forward, the BSP will continue to monitor (the) emergency price mandate of price stability conducive to balanced and sustained economic growth is achieved,” Diokno added.
Domestic price increases rose from 2.1 percent in May to 2.5 percent in June and 2.7 percent in July.
However, average inflation in the first seven months of the year stood at 2.5 percent, at the lower half of the government’s two percent to four percent target band from 2020 to 2022.
The BSP’s average inflation forecast for this year is 2.6 percent, and three percent and 3.1 percent for 2021 and 2022, respectively.
Inflation slightly picked up to 2.7 percent in July, from June’s 2.5 percent mainly due to higher transport costs.
Inflation in July 2019 reached 2.4 percent. Last month’s figure brought the average inflation for the first seven months of the year to 2.5 percent.
In a press briefing, Philippine Statistics Authority chief and national statistician Dennis Mapa said transportation costs increased brought about by higher tricycle rates, airfare, and ferry/ship fares.
The PSA attributed the inflation uptick last July to faster inflation rate of the transport index, along with the jumps in the alcoholic beverages and tobacco index; the housing, water, electricity, gas and other fuels index; and the restaurant and miscellaneous goods and services index.
Mapa said in the National Capital Region, the minimum charge per passenger rose to P17 last month from P8.50 in July 2019 while outside NCR increased to P13 from P11.
“The expectation is that the transportation component of the CPI (consumer price index) basket will continue to increase (with the modified enhanced community quarantine),” he said.
Mapa said the PSA is also on the lookout for the impact of the quarantine amid the coronavirus pandemic on food prices.
“Of course, what we are looking at is the impact of this on food. Because the supply chain may be affected and that would have a spike or increase in food items but of course, right now we are in the first week of data collection for August inflation,” he added.
Apart from higher transport costs, Mapa said other main sources of the upward trend for the July 2020 inflation are housing, water, electricity, gas, and other fuels particularly prices of liquefied petroleum gas; and restaurants and miscellaneous goods and services including articles for personal hygiene like rubbing alcohol and toothpaste.
He said prices of food and non-alcoholic beverages particularly meat, fish, and fruits also increased but at a slower pace last month.
Rice prices declined by 1.2 percent in July, posting negative inflation for the 15th month in a row since May 2019, he added.
Mapa said major commodity groups that posted a slower rate of price increases last month were food and non-alcoholic beverages; clothing and footwear; furnishing, housing equipment, and routine maintenance of the house; communication; recreation and culture; and education.
Inflation in the NCR increased to 2.2 percent in July from 2 percent the previous month while those areas outside the NCR went up to 2.9 percent from 2.7 percent.
Diokno remains confident of within-target inflation this year.
Average inflation rate in the first seven months this year stood at 2.5 percent, at the lower half of the government’s 2 to 4-percent target band for this year until 2022.
Core inflation, which excludes volatile food and oil, posted a faster rate of 3.3 percent from last June’s 3 percent, bringing the average to date to 3.1 percent.
Diokno said the inflation rate last July is within the central bank’s 2.2 to 3-percent projection range.
“The latest inflation outturn is consistent with the BSP’s prevailing assessment that inflation is expected to remain benign over the policy horizon due largely to the potential adverse impact of Covid-19 (coronavirus disease 2019) on the domestic and global economic prospects,” he said.
Diokno said monetary authorities’ latest baseline inflation forecasts show that average inflation rate this year until 2022 would likely end at the mid-point of the target band.