September inflation likely to drop further to 0.2% — BSP

Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said inflation in September likely slowed further to as low as 0.2 percent from 0.6 percent in August, driven mainly by lower power rates and rice prices.

“September inflation could remain low and settle within 0.2 to 1.0 percent range as downward adjustments in power rates and the modest decline in rice prices could offset the effect of a weaker peso during the month,” Tetangco said in a text message to reporters Tuesday.

The peso posted its lowest level this month at 46.93 on Sept. 8, as uncertainties on the timing of the US Federal Reserve’s increase in interest rates buoyed the greenback against most currencies.

It was also the local currency’s weakest level in more than five years, or since 47.06 on Nov. 24, 2009.

Tetangco said the impact of a stronger and protracted El Niño on food prices and utility rates could provide a source of upside inflation in the coming months.

“The BSP will continue to monitor evolving price trends to ensure price stability conducive to a balanced and sustainable economic growth,” he said.

Manila Electric Co. early this month announced a reduction in the cost of electricity. Power rates in September dropped by P0.57 per kilowatt-hour, marking the fourth consecutive month of price reduction. The September rate also became the lowest in five years.

The power distributor attributed the reduction in the overall rates to the generation charge, which fell P0.42 per kWh from the previous month.

Inflation in August further decelerated to 0.6 percent from 0.8 percent in July. Annual decreases in utilities and transport fares, traceable to lower oil prices, led to the 0.6 percent turnout.

The August inflation was significantly slower than the 4.9 percent for the same month last year. The August number brought the inflation rate in the first eight months to an average of 1.7 percent, well below the target range of 2 to 4 percent this year.

The policy-making Monetary Board of the Bangko Sentral ng Pilipinas on Sept. 24 kept the key policy rates steady for the eight time since October last year due to a manageable inflation environment.

It also kept the benchmark interest rates of 4 percent for overnight borrowing and 6 percent for overnight lending, as well as the interest rates on term RRPs, RPs, special deposit accounts and reserve requirement ratios.

Tetangco said the board based the decision on its assessment of the dynamics and risks in the inflation environment over the policy horizon.

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