Data supports BSP policy

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Declining food and non-food prices have pushed inflation to below the targeted band, the central bank noted on Friday, supporting last month’s decision to keep policy rates steady.

The rise in consumer prices slowed to 0.6 percent in the third quarter, the Bangko Sentral ng Pilipinas (BSP) said in its latest quarterly inflation report. This brought the year-to-date increase to an average of 1.6 percent, or below the 2 percent to 4 percent target.

The quarterly reports are released by the BSP as part of a transparency initiative where it seeks to detail the factors behind its inflation-targeted policy decisions. Minutes of the last policy meeting were released on Thursday.

Last Sept. 24, the Monetary Board decided to keep overnight borrowing and lending rates at 4 percent and 6 p ercent, respectively, but trimmed its inflation forecast for 2015 to 1.6 percent from 1.8 percent.


Inflation has been hitting record lows recently, easing to 0.4 percent last month from 0.6 percent in August. The Finance department expects a fresh low of 0.3 for October. Official data for the month will be released two weeks from now.

In its third quarter inflation report, the BSP noted that consumer prices rose at a faster pace of 1.7 percent in the second quarter and 4.7 percent a year earlier.

Food inflation eased to 1.1 percent in the third quarter from 3.1 percent in the previous quarter, attributed largely to lower prices of rice, corn, oils and fats along with moderate price increases for the rest of the major food items.

“Despite the lean season, rice prices remained subdued due mainly to adequate domestic supply brought about by the arrival of additional rice importation in August,” the BSP said.

Non-food inflation stood in at 0.1 percent in the second quarter compared to 0.5 percent in the second quarter. The report traced the decline to lower oil-related consumer items such as electricity, gas, and other fuels and transport prices.

“International oil prices, which remained lower than year-ago levels, resulted in price rollbacks of domestic petroleum products during the quarter while electricity rates were adjusted downward owing to lower generation charges from energy suppliers,” it said.

Given this, the BSP said “current monetary policy settings are appropriate.” It added that its latest baseline forecasts showed that inflation could settle slightly below the government’s target range of 3.0 percent, plus or minus 1.0 percentage point, for 2015 before approaching the midpoint of the target range in 2016 to 2017.

“Upside risks could come from the impact of stronger and protracted El Niño dry weather conditions on food prices and utility rates as well as pending petitions for power rate adjustments while the weakness in the global economy could provide downside risk to inflation,” it said.

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