Inflation seen to settle at 2.2pct-3.1pct in March

27-Mar-2012 Intellasia | | 7:01 AM Print This Post

The rate of increase in consumer prices is estimated to have settled between 2.2 and 3.1 percent in March.

This will bring the average inflation in the first quarter to a range of 2.9 to 3.2 percent, according to the Bangko Sentral ng Pilipinas.

Inflation in February hit 2.7 percent, while the rate in March last year was 4.3 percent.

The BSP said inflation would likely remain benign and stay well within the official projection of 3 to 5 percent for the full year.

BSP Governor Amando Tetangco Jr. said inflation in March would depend on how the slowdown in the prices of vegetables and reduced utility rates would affect overall consumer prices, given the impact of higher oil prices and a weakening peso.

The Philippines is vulnerable to spikes in oil prices due to its heavy dependence on fuel imports.

Also, the depreciation of the peso makes imported goods costly in local currency terms, causing increases in overall prices.

The peso, which stayed within the 42-to-a-dollar territory in February, broke into the 43 level in March as external concerns, such as the economic slowdown in China and potential disruptions in oil supply, dampened risk appetite of portfolio investors for assets from emerging economies like the Philippines.

Tetangco said that the BSP believed that the existing monetary policy stance remained appropriate.

“The BSP will continue to closely monitor developments to see if these would result in further second-round effects. We are mindful how these could reflect in the path of inflation over the policy horizon, the assessment of which will be a principal consideration in setting policy moving forward,” Tetangco said.

“Second round effects” refer to additional risks arising from initial inflationary pressures. For instance, a spike in global oil prices, which may result in a similar hike in local pump prices, may cause the prices of other goods to increase.


Category: Philippines

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