BSP sees inflation at 1.9 to 2.7% in October

"Higher domestic oil prices" could have combined with "transitory effects" of typhoon Karen and Lawin on food products to push inflation up. Philstar/File photo | By Prinz Magtulis via Philstar

            

MANILA, Philippines - After reaching an 18-month high in September, inflation could still trend higher this month on the back of higher oil and food prices, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday.

 

For October, consumer prices are seen to settle between 1.9 and 2.7 percent after a 2.3-percent uptick the previous month, BSP Governor Amando Tetangco Jr. said in a text message.

 

The forecast was up from 1.6 to 2.4 percent initially seen in September. It however still falls within the low-end of the BSP's two to four-percent target for the year. 

 

According to Tetangco, "higher domestic oil prices" could have combined with "transitory effects" of typhoon Karen and Lawin on food products to push inflation up.

 

"(This) could be partly offset by the slight decline in nationwide rice prices and power rates in Meralco-serviced areas," the central bank chief told reporters. 

 

From a common price of P27.40 per liter in Metro Manila by end-September, diesel rates have gone up to P28.70 as of October 18, data from the Department of Energy showed.

 

Gasoline prices also went up with common price at P42.80 per liter from just P41.75 during the same period.

 

This, as typhoon Karen and Lawin battered northern Luzon, causing combined damage to crops and infrastructure worth P6.4 billion as of October 24, disaster figures showed.

 

On the flip side, power distributor Manila Electric Co. (Meralco) lowered power rates by P0.1216 per kilowatt hour this month. 

 

According to consumer price index used to measure inflation, food, oil and utilities have the most effect to prices with their weights. 

 

Broken down, the sub-index on food and alcoholic beverages account for 39 percent, while electricity, gas and fuels corner 22.5 percent.

 

"Moving forward, the BSP will remain watchful of economic and financial developments that could affect inflation," Tetangco said.

 

BSP watches inflation as one of the bases on adjusting interest rates that financial institutions follow in lending and borrowing money.

 

Lowering rates mean allowing more money to flow in the system, hence, contributing to higher demand and prices, and vice versa. The BSP has so far kept rates steady this year. 

 

"(This is) in line with its commitment to the inflation target and in support of the Government’s growth objectives," Tetangco said.