Inflation rate picked up to a 28-month high of 3.4 percent in March from 3.3 percent in February, on higher prices of electricity, gas and other fuel products, the National Economic and Development Authority said Wednesday.
Inflation in March was the fastest since it reached 3.7 percent in November 2014. This brought the average inflation in the first quarter to 3 percent, the midpoint of the government’s target range of 2 percent to 4 percent for the whole year.
“Upward risks to inflation remain, but the overall outlook continues to be within government’s 2.0-4.0 percent target range for this year and next,” Economic Planning Secretary Ernesto Pernia said in a statement.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the March print was well within the forecast range of 3 percent to 3.8 percent for the month.
“As we have said, our runs show that the path of monthly inflation shows upticks until about the third quarter of this year before slowly decelerating to average within the target range,” he said.
“While we don’t see any immediate need to tweak policy rate settings, we are watching the international oil supply picture, developments in the CTRP, geopolitical devs. among others. We will make adjustments if and when needed,” Tetangco said.
Inflation in the non-food group accelerated to 2.8 percent from 2.5 percent in February 2017, and from 0.4 percent in March 2016. This was mainly due to the faster year-on-year price adjustments of electricity, gas and other fuels, which increased to 9.3 percent.
The hike was partly caused by a 20-day maintenance shutdown in the Malampaya gas field, shutting down three power plants”•Ilijan, Sta. Rita and San Lorenzo. The shift to liquid fuel from natural gas pushed up household electricity rate to P9.67 per kWh.
“Higher electricity rates are expected to persist in the next two months as the Energy Regulation Commission will spread the additional cost from the use of liquid fuel, which is more expensive than natural gas, until May 2017,” Pernia said.
Other sub-commodity groups that pushed inflation of non-food items upwards were furnishing, household equipment and routine maintenance of the house at 2.5 percent from 2.3 percent, and health at 2.8 percent from 2.6 percent.
Meanwhile, inflation in the food group decelerated to 4.2 percent in March from 4.3 percent in the previous month. This was due to slower price adjustments in fish, fruits, vegetables, sugar, jam, honey, chocolate, and confectionery and other food products.
Inflation in rice and meat accelerated to 2.3 percent and 3.2 percent, respectively. Both could be due to importation constraints imposed by the government, Neda said.
“Inflationary pressure may ease following the removal of quantitative restrictions on rice importation, and the timely augmentation of supplies. However, the likely recovery of international and petroleum prices in 2017 may keep consumer prices afloat,” Pernia said.
He said the possible adjustments in transportation fares and electricity rates in the coming months could exert upward pressure on prices. The continued depreciation of the Philippine peso against the US dollar may exert upward push on the cost of basic commodities and services.
“The recent upward trend in inflation needs to be closely monitored. The government needs to implement timely mitigating measures to ensure that prices remain stable,” Pernia said.