AFTER its deceleration in June to 4.1 percent from 4.5 percent, the growth of consumer prices in the country likely accelerated anew in July.
BSP Governor Benjamin Diokno told reporters on Friday that inflation likely hit 4.3 percent in July, but is expected to fall within the range of 3.9 percent to 4.7 percent during the month.
Inflation has been steady at 4.5 percent since March to May before falling to 4.1 percent in June. Inflation has not tamed down to a rate within the government’s target of 2 to 4 percent for the year.
Diokno attributed the expected increase in inflation to higher prices of domestic petroleum products and key food items, along with the upward adjustment in Meralco electricity rates and a weaker peso.
“Moving forward, the BSP will continue to monitor emerging price developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” the governor said.
The BSP has been keeping its monetary policy rates at record lows despite elevated inflation rates earlier this year, a move based on its assessment that the inflation acceleration is temporary and will likely dissipate towards the end of the year.
In their June meeting, the BSP forecast inflation to average at 4 percent for the year.
ING Bank Economist Nicholas Mapa, however, said this forecast of a within target inflation rate for the year is likely under threat due to the weak peso and elevated energy prices.
“In the coming months we expect inflation to remain elevated given a weaker currency, elevated energy costs and pricey food items with the BSP 4 percent forecast clearly under threat. BSP, however, will likely look past the breach given its supply-side nature while providing the economy as much support as it can muster amidst the current protracted economic downturn,” Mapa said.
“Despite the projected inflation breach, we do not expect BSP to recalibrate rates in the near term with Governor Diokno likely looking past the cost-driven acceleration. Hiking policy rates at a time where GDP is expected to fall below the official target of 6 to 7 percent will likely derail the fragile growth prospects for the country,” the economist added.