BSP: Inflation headed for new five-year high
August result ‘may actually be higher than the July number’ – Espenilla
Inflation could hit a new five-year high this month but is unlikely to reach 6.0 percent, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said on Friday.
“[N]ext month we will see the August data and based in our assessment, the August inflation number may actually be higher than the July number,” Espenilla told reporters.
“In our forecast, we are not seeing 6 percent. It might be close to the last one,” he added.
Consumer price growth accelerated to 5.7 percent in July, a fresh five-year high that brought year-to-date inflation to 4.5 percent, above the BSP’s 2.0-4.0 percent target for 2018.
Official data for August will be released by the Philippine Statistics Authority on September 5.
Inflation has yet to reach its 2018 peak, Espenilla said, which could be hit this month or in September.
“Upside risks also continue to dominate the inflation outlook. Meanwhile, inflation expectations remain elevated.
We also recognize that sustained pressures on the peso could adversely affect inflation expectations,” he added.
The central bank’s policymaking Monetary Board (MB) earlier this month raised its inflation forecasts for 2018 and 2019 to 4.9 percent and 3.7 percent, respectively, from 4.5 percent and 3.3 percent previously, and also issued a 3.2 percent inflation forecast for 2020.
A jeepney fare hike and higher water rates, tobacco excise taxes and Dubai crude oil prices were considered in the decision to revise this year’s forecast.
For 2019, monetary authorities took into account an expected decline in global non-oil import price growth and oil, food and excise taxes.
Increased inflation risks prompted the MB to raise its key interest rates by 50 basis points (bps) last August
9. The adjustment, which followed two 25-bps increases in May and June, took the BSP’s overnight borrowing, lending and deposit rates to 4 percent, 4.50 percent and 3.50 percent, respectively.
The last time that monetary authorities increased interest rates by 50 bps was in July 2008, when inflation hit 12.2 percent.
“The strong policy actions recently taken by the BSP are meant to rein in inflation expectations and prevent sustained supply-side price pressures from driving further second-round effects. We expect inflation to revert to target over the policy horizon,” Espenilla said.
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