The Bangko Sentral ng Pilipinas said Friday inflation rate in June likely accelerated to as high as 5.1 percent from 4.6 percent in May on higher food and liquefied petroleum gas prices.
The central bank’s Department of Economic Research said in a statement inflation in June would likely settle within a range of 4.3 percent to 5.1 percent based on the 2012-based consumer price index.
“Upward price pressures from rice and other agricultural commodities due to weather-related disruptions as well as the increase in LPG prices could be partly tempered by the reduction in fuel prices and electricity rates in Meralco-serviced areas,” it said.
“Going forward, the BSP will continue to keep a watchful eye on the risks to the inflation outlook to help ensure price stability conducive to a balanced and sustainable growth of the economy,” the regulator said.
Inflation in May rose to 4.6 percent from 4.5 percent in April, bringing the first five months’ average to 4.1 percent, beyond the official target range of 2 percent to 4 percent.
The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, raised on June 20 the overnight borrowing rate by another 25 basis points to 3.5 percent, wary of the possible second-round effects of inflation.
The interest rates on the overnight lending and deposit facilities were also increased accordingly.
The Monetary Board noted that inflation expectations remained elevated for 2018 and that the risk of possible second-round effects from ongoing price pressures argued for follow-through monetary policy action.
Bangko Sentral Governor Nestor Espenilla Jr. said that although inflation expectations remained within the target range for 2019, elevated expectations for 2018 highlighted the risk posed by sustained price pressures on future wage and price outcomes.
The June rate hike was the second time this year after the first 25-bps increase on May 10, 2018.
Espenilla expressed confidence that the two rate hikes might be sufficient for inflation to return to the target range of 2 percent to 4 percent in 2019.
“Equally important, while latest baseline forecasts have shifted lower for 2018-2019, upside risks continue to dominate the inflation outlook,” he said, adding that the impact of international oil and commodity price movements on overall inflation was expected to be stronger given the prevailing robust aggregate demand conditions.
The Monetary Board reduced the inflation forecast this year to 4.5 percent from the previous estimate of 4.6 percent made in the May 10 meeting. Likewise, the forecast for 2019 was cut to 3.3 percent from 3.4 percent.
Bangko Sentral deputy governor Diwa Guinigundo said the board took into account the possibility of the declining oil prices, and the assessment of the International Monetary Fund of the brighter outlook for the global economy.