BSP sees slower inflation in Dec

Bangko Sentral ng Pilipinas (BSP). RYAN LEAGOGO/INQUIRER.net FILE PHOTO

MANILA, Philippines—Consumer prices may have risen in December at their slowest pace in more than a year as food and fuel prices fell, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

The slower inflation in December assures that this year’s target, set at a range of 3 to 5 percent, will be achieved, and give the central bank space to consider a reduction in benchmark rates next year.

“The BSP will continue to monitor evolving price trends and adopt policies as may be needed to ensure price stability conducive to a balanced and sustainable economic growth,” Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. told reporters.

Inflation in December is expected to average between 2.4 and 3.2 percent, slowing from November’s 3.7 percent. The rate of consumer price increases peaked in July and August at 4.9 percent.

Tetangco credited lower rice prices, jeepney fares and power rates, as well as the successive reductions in fuel pump prices for the likely deceleration in inflation in December.

For all of 2014, the BSP expects inflation to average 4.2 percent.

The central bank’s main goal is to keep prices stable to protect consumer’s purchasing power. This is done through adjustments in interest rates to influence prices of bank loans. The amount of money circulating in the economy is also managed through various macroprudential measures.

Speaking to reporters, Tetangco said the BSP might consider a reduction in its benchmark interest rates if there would be a significant slowdown in inflation in coming months. This runs counter to most expectations that the BSP will increase interest rates by at least half a percentage point by the middle of next year.

“We would consider that and review if such a change in policy stance would be appropriate at that time,” Tetangco said, noting that the economy may benefit from lower interest rates.

He stressed, however, that hitting the inflation target for 2015 of 2 to 4 percent would be the central bank’s main priority. By moving to a lower range, the BSP may act more aggressively to counter inflationary pressures to ensure prices stay within targets.

Earlier this year, the BSP hiked interest rates from record lows by half a percentage point. The BSP’s overnight borrowing and lending rates now stand at 4 and 6 percent, respectively. Paolo G. Montecillo

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