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The recent increase of power rate drove inflation to further
increase in April, Bangko Sentral ng Pilipinas (BSP) said yesterday.
The increase in prices is likely to reach 7
percent in April from 6.4 percent in March due to prevailing high
prices of oil and commodities, most especially adjustment in power
rates.
“With the continued increase in oil and
non-oil commodity prices, we expect April inflation to average 6.4
percent to 7 percent. The power rate adjustment in April is also
expected to push inflation higher,” BSP Gov. Amando Tetangco, Jr.
told reporters.
Tetangco said BSP is watchful of the
second-round effects of inflation, such as wage and power rate
increase, which would affect the Monetary Board’s decision on
interest rate adjustment.
Consumers’ electricity bills in franchise
areas of the Manila Electric Co. (Meralco) shot up in April. Based
on actual billings for this month, adjustments in the
Lopez-controlled distribution utility’s generation, distribution,
system loss, and transmission charges have resulted in a P0.9753 per
kilowatt-hour increase in electricity rates. A large chunk of the
rate increase came from Meralco’s higher generation charges, which
rose by P0.5188 per kilowatt hour, and its distribution charges,
which went up P0.3036 per kilowatt hour.
Meanwhile, labor wage was proposed to increase
by additional P80 per day of the current minimum wage of P362 per
day.
Tetangco assured that central bank’s inflation
target, which is set at 2.5 percent to 4.5 percent is still
achievable in 2009, versus the Hong Kong and Shanghai Banking Corp (HSBC)
inflation projection of 4.9 percent. HSBC economist Frederic Neumann
earlier said the increase of prices is demand-driven as oil demand
in emerging economies remains strong, driving commodity prices to
increase, not only in the Philippines.
Food accounts for 55 percent of the country’s
inflation basket.
Meanwhile, Tetangco said inflation in 2008 is
likely to exceed BSP’s inflation target of 3 percent to 5 percent.
“Inflation outlook is clouded with risks but
the 2009 target of 3.5 percent plus or minus 1 percentage point is
achievable,” he said.
Neumann earlier said BSP has to raise overnight
borrowing rate by 75 basis points this year to 5.75 percent from the
current 5 percent as the loose monetary conditions are seen partly
responsible for surging inflation.
High inflation, particularly surging rice
prices, adds pressure on government expenditures.
This means the government will increase its
subsidies and the administration will have to boost expenditures on
other types of policies to help cushion further increase of food
prices.
BSP’s key policy rates stood at 5 percent for
overnight borrowing and 5.75 percent for overnight lending.
-- Maricel E. Burgonio
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