BSP pegs February inflation at 2.2-3%
Costlier power bills and higher prices of oil and key farm products were the main sources of upward price pressures in February, but those were likely not enough to push inflation beyond 3 percent, according to the Bangko Sentral ng Pilipinas (BSP).
In a statement on Friday, the BSP said inflation, as measured by the consumer price index (CPI), might have settled between 2.2 percent and 3 percent last month.
If the upper-limit of the forecast range comes to pass, the figure that will be reported by the Philippine Statistics Authority (PSA) on March 5 will be faster than the 2.9 percent inflation in January.
But the central bank’s prediction suggested that the CPI would stay within its 2 to 4 percent target band.
The first driver of inflation that the BSP identified was higher electricity rates. It may be recalled that Manila Electric Co., the largest power distributor in the country, hiked its electricity rate by 28 centavos per kilowatt hour (kWh) in February due to a more expensive generation charge.
Other sources of upward price pressures last month were higher prices of oil and key agricultural commodities like fish and meat, the central bank added.
But these price spikes are expected to be offset by more affordable rice, fruits and vegetables, as well as “negative base effects”.
“Going forward, the Monetary Board will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment,” the BSP said.
Easing to continue?
As it is, another month of benign inflation could give the BSP more room to lower borrowing costs, although the timing of the next interest rate cut remains the talk of the market.
At its first policy meeting for this year, the central bank decided to keep the benchmark rate that banks typically use as a guide when pricing loans untouched at 5.75 percent. The move defied market expectations, with Governor Eli Remolona Jr. admitting that it was not an easy decision for monetary authorities.
At a press conference yesterday, Ritchie Ryan Teo, chief investment officer at Sun Life Investment Management and Trust Corp., said the BSP might cut rates “two to three times” this year, adding that monetary authorities might resume easing in April.
Stay within target
“But it will really depend on what will happen. If there will really be extreme tariff measures that will increase inflation, then probably they won’t cut first. They will put on hold because they will prioritize flexibility,” Teo said.
Separately, Jonathan Koh, economist at Standard Chartered Bank, said inflation would likely stay within target this year.
“What are some of the upside risks to inflation? I think clearly it’s electricity. So, that could potentially add a little bit to inflation,” Koh said. “But we do think that lower rice prices should help more than offset that already. So, we are not as concerned.”
