BSP sees higher inflation in July

MANILA, Philippines — Inflation in July likely jumped to a higher level and exceeded the previous month’s print due to rising prices of electricity, food and fuel, the Bangko Sentral ng Pilipinas said Tuesday.

In a statement, the BSP’s economic research department expects prices of key consumer items to spike 5.1-5.8 percent in July.

Actual inflation rate in June was at a five-year high of 5.2 percent, pushing the year-to-date figure to 4.3 percent or above the central bank’s 2-4 percent target range.

“The increases in electricity rates in Meralco-serviced areas, domestic gasoline and LPG prices, jeepney fares, scheduled increase of the tobacco excise tax, and prices of rice and other agricultural commodities could lead to upward price pressures during the month,” the central bank said.

“Meanwhile, there was a slight downward adjustment in domestic diesel prices for July,” it added.

People have blamed soaring prices on the Duterte administration’s tax reform law, which raised excise levies on fuel and “sin” products, among others. Supply-side factors like higher global oil prices—exacerbated by the continuing depreciation of the peso—are also pushing up commodity prices.

Governor Nestor Espenilla early this month signaled that the BSP is building the case for a third rate hike this year, saying the central bank is considering a “strong follow-through monetary adjustment” in August.

The BSP has lifted its benchmark rates twice this year, but analysts say more monetary policy actions are necessary to temper inflation, strengthen the peso and contain capital flight.

In a research note, British banking giant HSBC said a 50 basis points (bps) hike is needed over the traditional 25 bps adjustment to rein in inflation.

“Going forward, the BSP will continue to keep a watchful eye on the risks to the inflation outlook and will take necessary action to help ensure that inflation expectations remain firmly anchored to the target,” the BSP said.

The government will release the July inflation data on August 7. — Ian Nicolas Cigaral