Respite

Respite

The National Economic and Development Authority (NEDA) said the stable inflation rate in April is a respite from the upward inflation trend in the first three months of the year.

“Nevertheless, volatilities in oil prices and erratic exchange rates can still manifest into higher domestic prices for both food and non-food commodities,” NEDA Officer in Charge and Undersecretary for Investment Programming Rolando Tungpalan said in a separate statement.

Inflation in the non-food group decelerated to 2.7 percent in April 2017 from 2.8 percent in March. Slower inflation in this group can be attributed to the sluggish price adjustments of electricity, gas and other fuels after the Malampaya Gas Field resumed operations after a two-month maintenance shutdown from January to February 2017, according to NEDA.

Lower pump prices of diesel, gasoline, kerosene and liquefied petroleum gas contributed to slower non-food inflation, it added.

Inflation in the food and non-alcoholic beverage group accelerated to 4.2 percent in April from 4 percent in March. Partially tempering the increase in food inflation were fruits, vegetables, sugar, jam, honey, chocolate and confectionery, NEDA noted.

Prices of rice, meat and fish remained high due to supply constraints, it said, citing data from the PSA that showed a declining inventory of commercial rice and in warehouses of the National Food Authority.

Manageable outlook

“The numbers confirm the manageable inflation outlook for the year,” Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr. told reporters in a text message.

At the moment, the BSP deems its policy settings to be appropriate, Tetangco said.

“[B]ut we continue to monitor changes in commodity prices, particularly petroleum products as well as petitions for utility rate increases, which we see are possible risk factors to our baseline scenario,” he added.

Since lowering the reverse repurchase rate to 3 percent from 4 percent in the run-up to adopting an interest rate corridor system on June 3, 2016, the central bank has kept the policy rate unchanged.

The Monetary Board (MB) has kept the corresponding rates for overnight lending and deposit facilities steady at 3.5 percent and 2.5 percent, respectively. The reserve requirement ratio was also left unchanged at 20 percent.

Upside risks

ANZ Research economist Eugenia Victorino said the underlying price pressures are strong despite a steady print in April’s headline inflation at 3.4 percent,.

“Monthly gains in food and transport prices contributed significantly to the overall annual change. However, more important is that core inflation has continued to firm up, rising 3 percent year-on-year during the month,” she said.