The inflation rate likely settled within a range of 3.8 percent to 4.6 percent in March, driven by higher power rates and petroleum products, the Bangko Sentral ng Pilipinas said over the weekend.
The Bangko Sentral said in a statement it considered all recent developments and information that could affect price dynamics before coming up with the March inflation projection.
“The BSP Department of Economic Research projects the 2012-based March 2018 inflation to settle within the 3.8 [percent] to 4.6 percent range… Adjustments in electricity rates owing to increased power generation charges as well as higher prices of domestic petroleum products, reflecting recent depreciation of the peso, are expected to contribute to upside price pressures,” it said.
“There were also observed higher rice prices during the month. Meanwhile, these upside pressures could be partly offset by lower liquefied petroleum gas prices,” it said.
Inflation in February accelerated to 4.5 percent, the fastest in more than three years on faster increases in the prices of food, non-alcoholic beverages and tobacco products.
The data were based on the 2006 consumer price index. Based on the 2012 index which was recently adopted by the Philippine Statistics Authority, inflation settled at 3.9 percent in February, faster than 3.4 percent in January.
The Bangko Sentral said it would continue to monitor closely evolving price conditions over the policy horizon against any signs of incipient price pressures and remained ready to take appropriate measures as necessary to ensure that the monetary policy stance continued to support price stability objectives.
Bangko Sentral Deputy Governor Diwa Guinigundo said earlier inflation was expected to remain manageable although it would likely peak in the third quarter this year.
“In terms of our preliminary estimates on the monthly movements of inflation, we expect inflation to peak by the third quarter and thereafter, we should be seeing on a monthly basis the inflation rate 4 percent or lower than 4 percent,” Guinigundo said in an interview.
“And that is the reason why you have an inflation forecast of 3 percent for 2019 coming down from 3.1 percent and in the last quarter of 2018, we should be seeing 4 percent of lower monthly inflation,” he said.
The policy-making Monetary Board of Bangko Sentral, in its last meeting on March 22, decided to maintain the benchmark interest rate at 3 percent for overnight borrowing.
The Monetary Board said the decision was based on assessment that while recent inflation outturns showed an elevated path in 2018, the latest baseline forecasts continued to show inflation remaining within the inflation target of 2 percent to 4 percent in 2018 and moderating in 2019.
The Monetary Board said it also considered that prospects for domestic activity continued to be firm on the back of robust domestic demand, strong growth in credit and liquidity and a sustained recovery in global economic growth.
Inflation rate averaged at 2.9 percent in 2017.