Inflation up slightly to 4.8% in September

MANILA, Philippines – Consumer prices went up slightly to 4.8 percent in September from 4.7 percent in August due to higher water and power rates as well as rising fuel prices, the National Statistics Office (NSO) reported yesterday.

For the nine-month period, the nationwide inflation stood at 4.8 percent, nearing the upper limit of the three percent to five percent target of the Bangko Sentral ng Pilipinas (BSP) for the year.

Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. said in a text message to reporters that inflation for September remained manageable and fell within the expected range set by monetary authorities.

“Inflation for September fell within the expected range of the BSP. This supports our view that inflation remains manageable over the policy horizon,” Tetangco said.

Last Sept. 8, the BSP lowered anew the central bank’ inflation forecasts for this year and next year due to lower than expected actual inflation for the months of July and August as well as lower global economic growth. It lowered the inflation forecast to 4.46 percent instead of 4.7 percent this year and to 3.4 percent instead of 3.74 percent next year.

During the meeting, the body left key interest rates unchanged for the third consecutive policy rate-setting meeting on the back of the lower- than-expected economic growth in the second quarter of the year as well as the benign inflation outlook amid stable oil and food prices in the world market.

The BSP raised interest rates by 25 basis points last March 24 and by another 25 basis points last May 5 as a preemptive move to keep inflation expectations well anchored amid the escalating price of oil in the world market. The overnight borrowing rate is currently pegged at 4.50 percent while the ovenight lending rate is 6.50 percent.

The policy rate setting body, however, kept interest rates steady last June 16 and July 28 but raised the reserve requirement ratio for banks by a cumulative 200 basis points to 21 percent from 19 percent to siphon off P70 billion from the financial system and curb additional inflationary pressures arising from excess liquidity brought about by strong inflow of foreign capital.

The next policy rate-setting meeting of the BSP’s Monetary Board is scheduled on October 20.

Tetangco said the BSP would continue to be mindful of global developments particularly growth prospects in advanced economies which could affect local and regional aggregate demand.

“We also are watchful of policy developments to resolve the European debt crisis as these could impact on risk appetite and therefore capital flows in emerging market economies including the Philippines,” he added

According to him, the BSP would also take into consideration the impact damages brought about by the series of natural calamities particularly typhoons Pedring and Quiel that pounded the agriculture-rich Northern Luzon on consumer prices.

“We are also monitoring the potential effect of the series of typhoons on the general level of domestic prices, although our expectation is that this should not have a persistent impact on inflation over the policy horizon,” the BSP chief said.

Data released by the NSO showed that core inflation – which strips the volatile food and fuel items – edged up to 3.5 percent in September from 3.4 percent in August. Core inflation slowed to 3.5 percent in the first nine months of the year from 3.8 percent in the same period last year.

Based on 2006 prices, the NSO reported that inflation rose to 4.8 percent in September from 4.7 percent in August due to higher annual increases in the indices of clothing and footwear; housing, water, electricity, gas and other fuels; health; transport; and recreation and culture were noted during the month.

Inflation last month was higher compared to a year ago level of 3.9 percent.

At the national level, a faster rate of annual increment was noted in clothing and footwear index at 3.9 percent in September from 3.8 percent in August; housing, water, electricity, gas, and other fuels to 5.7 percent from 5.1 percent; health to 3.4 percent from 3.3 percent; transport to 7.1 percent from 6.9 percent; and recreation and culture to 1.7 percent from 1.6 percent. –Lawrence Agcaoili (The Philippine Star)