The BANGKO Sentral ng Pilipinas said the inflation rate in August likely accelerated further to 5.9 percent from 5.7 percent in July due mainly to higher food prices driven by heavy rains associated with southwest monsoon and successive typhoons during the month.
The Bangko Sentral’s Department of Economic Research forecasts inflation in August within the range of 5.5 percent and 6.2 percent.
“The central forecast implies a slight deceleration of the month-on-month inflation. Higher price of rice and key food items due to weather disturbances and supply disruptions, increase in gasoline and LPG prices, and slight upward adjustments in electricity rates in Meralco-serviced areas contributed to upward pressures in August,” the department said.
“Meanwhile, lower diesel and kerosene prices as well as modestly appreciated peso could partly temper price pressures this month,” it said.
The central bank said it would remain watchful of economic and financial developments that could affect the inflation outlook and closely monitor inflation expectations and emergence of further second-round effects ahead of the Monetary Board policy meeting in September.
Earlier, private economists said they expected inflation to peak to 5.9 percent in August from 5.7 percent in July as intermittent weather disturbances affected food prices during the month.
In a joint report for the month of August, First Metro Investment Corp. and University of Asia & the Pacific expressed optimism that inflation would decelerate in the succeeding months.
“Headline inflation will peak in August given the heavy rains and flooding during the month,” FMIC and UA&P said in the Market Call report for the month.
“The saving factor in the third quarter would be normalizing food prices, due to September rice harvests and larger imports and downward trending crude oil prices to well below $70/barrel. Electricity rates should also go down as hydro-power plants go full blast during the rainy season,” they said.
They said inflation in September might slow down to 5.2 percent and further to 5 percent in October.
Inflation in July accelerated to a more than five-year high of 5.7 percent from 5.2 percent in June based on the 2012 price index, due mainly to higher food prices. The figure brought the inflation average in the first seven months to 4.5 percent, well over the target range of 2 percent to 4 percent this year earlier set by the government.
The economists said unless inflation started to slow down and exports began to move to positive territory, economic growth would continue to remain tepid, or around 6.5 percent or less in the third quarter.
“… With construction [especially infrastructure] and manufacturing remaining robust, the underlying growth momentum should hold up,” they said.