Headline inflation held steady at a year-on-year rate of 4.9 percent in August, unchanged from July but more than double the pace of 2.1 percent recorded in the same period last year, the latest data from the Philippine Statistics Authority (PSA) showed on Friday.
The price indices showed increases in food and non-alcoholic beverages; clothing and footwear; housing, water, electricity, gas and other fuels; furnishing, household equipment and routine maintenance of the house; as well as health costs, while posting deceleration in transport, restaurant, miscellaneous goods and services.
Those for the rest of the commodity groups remained at their previous month’s rates, the PSA said in the report.
Annual inflation in the Metro Manila area stepped up to 4.4 percent in August from 3.9 percent the previous month and -0.1 percent in August 2013.
In areas outside Metro Manila, inflation eased to 5.0 percent from 5.1 percent, although it was still much higher than the 2.7 percent recorded a year earlier.
The Bangko Sentral ng Pilipinas (BSP) said August inflation is closer to the lower end of its forecast range of 4.7 percent to 5.5 percent for the month.
For the full year, inflation is forecast at 3 percent to 5 percent.
Core inflation a concern
Excluding selected food and energy items, core inflation picked up pace to 3.4 percent in August from 3 percent in the preceding month and 1.9 percent a year earlier.
“We will consider this, and other developments on the local/external front at our meeting next week, to see if there is need to make further adjustments to policy settings so as to keep inflation expectations well anchored,” BSP Governor Amando Tetangco Jr. said in a text message to reporters.
The next Monetary Board meeting in which the latest policy stance is decided and later announced is scheduled for September 11.
Policy tightening seen
Given the higher core inflation during the month, an analyst said the central bank is likely to further tighten its monetary policy.
“I’m still expecting additional tightening of monetary policy. Core inflation for August has jumped and seems to be trending higher,” said ING Bank Manila senior economist Joey Cuyegkeng.
“Inflation remains a concern. Ensuring that inflation will be within next year’s 2 percent to 4 percent inflation target range is a priority, in my view. Liquidity in the system remains high even as liquidity growth is slowing,” he said.
Cuyegkeng is referring to the cash and cash-equivalent securities circulating within the economy, the growth of which slowed from 23.3 percent in June to 18.3 percent in July to reach P7.1 trillion.
Expectations ‘well anchored’
In a separate statement, the National Economic and Development Authority (NEDA) said that despite the upward pressures on prices, the overall market expectations on inflation remain well anchored.
Socioeconomic Planning Secretary Arsenio Balisacan cited the effect of the Monetary Board’s recent move to hike interest rates by 25 basis points to 3.75 percent for the overnight borrowing or reverse repurchase facility and 5.75 percent for the overnight lending or repurchase facility.
“Such policy action by the Bangko Sentral ng Pilipinas is expected to put a brake on potential price pressures,” he said.