July inflation to hit below 1% – forecast

MANILA, Philippines – The inflation rate in July is likely to plunge below 1%, Philippine Department of Finance (DOF) undersecretary Gil Beltran said Wednesday, July 29.

Inflation is the rate of the rise of prices of goods and services. As inflation rises, purchasing power falls.

Based on DOF’s Economic Bulletin on the July 2015 Inflation Forecast, the rate for this month is estimated at 0.7%, further lower than the June inflation rate of 1.2%. This would be the lowest to date covering the monthly inflation series from 1995 to June 2015 using the current base year 2006.

The June inflation also defied analysts’ expectations that it would not go any lower than 1.6%, the record for May 2014, citing strong pressures from the probable impact of drought, poor agricultural harvest, and election-related spending in the coming months. (READ: Philippine inflation unlikely to go lower than 1.6%)

The National Economic and Development Authority (NEDA) earlier said the figure was also below the market expectation of 1.5% and very well within the inflation target range of 2% to 4% set by the government for this year.

But the July forecast comes as fuel prices remain depressed and Manila Electric Company (Meralco) rates are slashed by nearly 12%, year-on-year, Beltran said.

“Food price inflation appears to be losing momentum,” he added.

The Bangko Sentral ng Pilipinas sees the inflation rate for July within the 0.5% to 1.3% range.

The lower end of the central bank’s estimate, if it happens, would mark another record low for the increase in prices of most consumer goods per 2006 prices.

Central bank governor Amando M. Tetangco said they will continue to monitor domestic and global developments to ensure the policy stance remains supportive of price stability conducive to a balanced and sustainable economic growth.

Central banks act to stop severe inflation or severe deflation to keep excessive growth of prices to minimum possible.

Beltran said that the lower inflation will allow BSP to maintain accommodative monetary policy that will sustain rapid economic growth.  

“It will dampen the adverse impact of external volatilities, including the Chinese slowdown, the Fed (US Federal Reserve) normalization, and the Greece exit,” the DOF’s chief economist said.

“It will help reduce poverty incidence and move the country closer to its Millennium Development Goals,” he added.

NEDA earlier said the government will remain cautious against any upside inflation risk, like typhoons, in the second half, which could be intensified by the prolonged El Niño.

The inflation report for this month will be released by first week of August. – Rappler.com

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