Yt Framework

The Bangko Sentral ng Pilipinas (BSP) projects inflation rate to stay between 2.5-3.4 percent in June 2012, a range that is near the 2.9 percent actual rate last May given the balance of risks of higher utility rates and lower oil prices.

BSP Governor Amando Tetangco Jr., in a text message to reporters, identified upside risks as the higher utility rates increases in selected vegetables, and peso depreciation while the downside risks include lower prices of international crude oil prices and decreases in the domestic prices of fuel products.
“This and the latest projection for the inflation path over the policy horizon continue to support our view that inflation is manageable,” he said.
Tetangco, on the other hand, stressed that the central bank remains “watchful of developments in the global front that could affect our domestic price and growth dynamics.”

“We will make adjustments to our stance of policy as, and if, needed,” he added.
In the first five months this year, rate of price increase averaged at three percent, which is the lowest end of the government’s three to five percent target until 2014.

Monetary officials continue to see manageable inflation path until next year but have increased their average inflation projection for this year and the next given the increase in the inflation rate and the higher-than-expected expansion of the domestic economy in the first quarter this year.
To date, the BSP projects inflation to average at 3.1 percent from 3.07 percent during the meeting of central bank’s policy-making Monetary Board (MB) on April 19, 2012. The forecast for 2013 was raised to 3.4 percent from 3.27 percent previously.

Earlier, BSP Deputy Governor Diwa Guinigundo said that aside from the increase in the inflation rate and higher-than-expected growth of the economy in the first quarter, at 6.4 percent from upwardly revised 3.9 percent in end-2011, the other factor for the increase in the inflation forecast is the appreciation of the local currency and the higher-than-expected salary increase.

The government’s exchange rate projection for this year is a range between 42-44 while salary hike is projected to increase to P448 this year and P471 next year.

To date, the local currency is trading at 42-level while minimum wage in Metro Manila is now at P446, which will increase to P456 in November, thus, higher than central bank’s assumption.

Guinigundo, on the other hand, stressed that amid the increase in the average inflation forecasts for this and next year, rate of price increases remains manageable.

“What is clear from the numbers is that average forecast remains within target,” he added.

by: PNA