BSP expects lower inflation in Oct

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The country’s headline inflation rate continued to ease in October as improved supply conditions resulted in lower food and oil prices, the central bank said in its regular monthly forecast.

“We expect inflation to continue slowing down in October 2014. From the peak of 4.9 percent in July and August and 4.4 percent in September, our latest assessment of inflation pressures indicates sustained easing, averaging between 3.7 percent and 4.6 percent,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said in a text message to reporters on Tuesday.

Tetangco said the significant drop in oil prices, lower prices of both well-milled and regular-milled rice as well as meat and vegetables are expected to support a more modest inflation rate in October.

Improved supply of key food commodities due to favorable weather conditions and higher imports will sustain the easing of price pressures, he added.


In addition, the BSP Governor said the central bank expects that its previous monetary actions will continue to anchor inflation expectations and maintain favorable money supply conditions.

“Both credit and domestic liquidity growth are anticipated to keep decelerating (as a result of higher flowback of money supply to the monetary authorities) following the increase in the required bank reserves, the SDA [special deposit account]and policy rates,” he said.

At its October 23 meeting, the Monetary Board of the BSP decided to keep its existing rates for overnight borrowing and lending, as well as the SDA and the reserve requirement ratio (RRR) for banks.

The rate for the overnight borrowing, or reverse repurchase facility stayed at 4.0 percent and the rate for overnight lending, or repurchase facility remains at 6.0 percent. The interest rate for SDA was also left unchanged at 2.50 percent, as well as 20-percent RRR for banks.

The central bank also trimmed its inflation forecast for full-year 2014 to 4.4 percent from the previous forecast of 4.5 percent. For 2015, the forecast was also adjusted downward to 3.7 percent from 3.8 percent.

For 2016, it was adjusted to 2.8 percent from the previous 3 percent.

“On the whole we remain confident that inflation will be within the target of 3 percent to 5 percent this year and 2 percent to 4 percent in 2015 and 2016,” Tetangco concluded.

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