KEEPING A HAWKISH STANCE DESPITE EASING PRICES

BSP sees Sept inflation at 4.1-4.9%

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Business is brisk for vegetable vendors on this street market in Manila. AFP PHOTO

Business is brisk for vegetable vendors on this street market in Manila. AFP PHOTO

The central bank, maintaining a hawkish stance despite price pressures appearing to have eased this month, is expecting September inflation to show a slightly softer bias from the 4.9 percent level where the indicator has stayed over the two preceding months.

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“Sept. inflation is projected to settle within 4.1 percent to 4.9 percent,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. said in a text message to reporters at the weekend.

In August, headline inflation held steady at a year-on-year rate of 4.9 percent, unchanged from July, but still the highest rate since October 2011.

Although he said price pressures on select food items seem to have eased due to some improvement in supply conditions, he still observed mild increases in rice prices.

But he added that reductions in power rates and prices of some oil products are expected to temper inflation this month.

The BSP governor said the central bank will continue to closely monitor domestic price movements, as well as developments in the global financial markets.

“We will implement measures, as needed, to keep inflation expectations in check, in line with our commitment to deliver price stability,” Tetangco said.

The BSP provides regular monthly forecast bands for inflation, apart from its projected range for the year, which for full-year 2014 was set at 3 to 5 percent.

In a preemptive response to signs of inflation pressures and elevated inflation expectations, the Monetary Board of the BSP at its September 11 meeting decided to raise its key policy rates and the interest rate for special deposit accounts (SDA) by 25 basis points each.

The rate for the overnight borrowing, or reverse repurchase facility now stands at 4.0 percent, up from 3.75 percent, and the rate for overnight lending, or repurchase facility, has been raised to 6.0 percent from 5.75 percent. Interest rate paid on SDA was also hiked to 2.50 percent from 2.25 percent.

The central bank also raised its inflation forecast for 2014 to 4.5 percent from the previous forecast of 4.3 percent. For 2015, the forecast has been adjusted upward to 3.8 percent from 3.7 percent and that for 2016 was lifted to 3 percent from 2.8 percent.

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