Inflation will remain manageable in the coming months despite the acceleration in consumer prices to a three-month high of 3.1 percent from 2.8 percent a month ago, Finance Undersecretary Gil Beltran said.
The faster inflation was primarily driven by higher increases in the prices of food, transport, water, electricity and fuel. The August print was also faster than the 1.8 percent a year ago. This brought inflation in the first eight months to 3 percent, the midpoint of the target range of 2 to 4 percent for the whole year.
“Inflation rate for August increased to 3.1 percent, reflecting DOF’s internal forecast. The uptick is driven both by food and non-food items. Vegetable prices increased due to recent weather disturbances and fuel price hikes also drove transportation price increases,” Beltran said in his Economic Bulletin on Inflation released today.
“Core inflation of 3 percent indicates that headline inflation for the next few months may be around that neighborhood. Nevertheless, this is still within the monetary target range, giving ample space for maneuver to address both domestic and external disturbances,” Beltran said.
DoF data showed that the core inflation of 3 percent in August 2017 was higher compared to the 2.1 percent a month ago and 2 percent a year ago.
Philippine Statistics Authority data showed that the indices of Alcoholic Beverages and Tobacco increased by 6.3 percent; Housing, Water, Electricity, Gas and Other fuels (2.8 percent); Transport (4.4 percent); Communication (0.3 percent); Recreation and Culture (1.4 percent); and Restaurant and Miscellaneous Goods and Services (2.2 percent).
The rest of the commodity groups either had slower annual add-ons or retained their previous month’s rates.
Food inflation rose to 3.7 percent in August 2017 from 3.4 percent in July 2017. This was mainly due to faster price increases in vegetables, fish, corn, flour, bread, and other cereals.
Socioeconomic Planning Secretary Ernesto Pernia said one cause for higher increases in food prices was Typhoon Jolina last month, which affected agriculture in Central Luzon, particularly in Aurora province.
Pernia, however, said inflation was still expected to remain well within government’s target for the year of 2 to 4 percent despite accelerating for the second time in a row.
For his part, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the within-target path of inflation provides the BSP with the flexibility to assess its monetary tools to enhance further its responsiveness to the evolving requirements of the economy.
Standard Chartered Bank’s economist for Asia, Chidu Narayanan, said the manageable inflation environment would allow the Bangko Sentral to keep steady its policy rates for the rest of the year.
But Narayanan shared Bangko Sentral’s view that inflation could be faster in 2018 to be driven by the government’s proposed tax increases.
Monetary authorities earlier said inflation likely peaked in March and April at 3.4 percent as shown by the deceleration in consumer prices in two succeeding months. May inflation slowed to 3.1 percent from 3.4 percent in April. It further decelerated to 2.8 percent in June (which was revised later to 2.7 percent).
On Aug. 10, 2017, the policy-making Monetary Board of Bangko Sentral kept the benchmark interest rates steady on lower inflation and expected robust domestic economic growth. The interest rates of 3.5 percent for overnight lending, 3 percent for overnight borrowing, and 2.5 percent for deposit facilities were maintained. The reserve requirement ratios were also maintained.
In 2016, inflation averaged 1.8 percent, lower than the target range of 2 to 4 percent set for that year.