BSP sees slightly lower inflation in May

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BSP sees slightly lower inflation in May
The Bangko Sentral ng Pilipinas attributes this to lower oil prices and electricity rates

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) said inflation would range between 2.9% and 3.7% this month, thanks to lower oil and electricity prices.

This was after the prices of basic goods and services remained steady at 3.4% in April. (READ: Philippine bankers cheer Espenilla’s appointment)

BSP Governor Amando Tetangco Jr said rollbacks in domestic oil as well as the downward adjustment in electricity rates could exert downside influence on inflation.

But he added that higher rice prices could partly offset the impact of declining oil prices and cheaper power rates.

“Moving forward, the BSP will continue to monitor evolving price conditions in line with the BSP’s commitment to price stability conducive to balanced and sustained economic growth,” he added.

The stable inflation rate in April was a respite from the upward inflation trend in the first 3 months that brought inflation to a 28-month high of 3.4% in March.

Tetangco earlier said inflation would continue its upward trend until August or September before easing starting the 4th quarter of the year.

The BSP has set an inflation target of between 2% and 4% this year and next year. Last year, the central bank missed its inflation target as the consumer price index averaged 1.8%.

The BSP’s Monetary Board has retained its inflation forecast at 3.4% this year and 3% next year, as it now projects lower oil prices offsetting the transitory impact of the proposed tax reform program as well as adjustments in transport fares and electricity rates.

The country’s gross domestic product (GDP) growth eased to 6.4% in the 1st quarter of 2017, from 6.6% in the 4th quarter of 2016 due to weaker-than-expected private consumption data. (READ: Gov’t infra push fails to spark economy in Q1)

The Philippines has booked the highest economic growth in the region as it registered positive GDP growth for 73 straight quarters.

Economic managers penned a GDP growth target of between 6.5% and 7.5% this year, from 6.9% last year.

The robust domestic demand and benign inflation environment has allowed the BSP to keep a dovish stance for more than two years. It last raised interest rates by 25 basis points in September 2014. (READ: BSP maintains policy rates, inflation forecast)

Last June, the BSP made an operational adjustment, slashing key policy rates as part of the shift to the interest rate corridor (IRC) system.

Tetangco, 64, is set to preside over his last rate-setting meeting as head of the BSP and chair of the Monetary Board on June 22, ending his central banking career at 43 years.

He will be replaced by BSP Deputy Governor Nestor Espenilla Jr, who has been with the central bank for the past 35 years. Espenilla, 58, is set to preside over his first rate-setting meeting as chair of the Monetary Board on August 10. (READ: Espenilla promises continuity, more financial innovation at BSP) – Rappler.com

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