MANILA, Philippines - Inflation was below three percent for the first time in more than two years in February on lower food and utility prices, supporting a Bangko Sentral ng Pilipinas (BSP) move to trim borrowing costs last week and giving it room to keep rates at a record low to bolster demand.
The consumer price index rose 2.7 percent in February from a year earlier, the National Statistics Office (NSO) reported yesterday. That was the slowest annual rate since September 2009 and at the low end of the central bank’s forecast of 2.7 percent to 3.6 percent.
For January, the statistics office revised the annual inflation rate to 3.9 percent from four percent.
The latest inflation data would allow the central bank “to continue a monetary policy stance that will be supportive of growth,” BSP Governor Amando Tetangco Jr. said at a government economic briefing.
“This support our assessment that inflation is manageable. Over the policy horizon we expect inflation to be below the mid-point of our target range of three percent to five percent,” Tetangco said.
“We will continue to monitor developments, particularly in the MENA (Middle East and North Africa) and their impact on volatilities in international prices, to see if there is any need to adjust our policy stance,” he added.
The consumer price index was flat from January on a month-on-month basis, compared with economists’ median forecast of 0.5 percent.
The BSP cut its main policy rate by 25 basis points to a record low of four percent last Thursday.
So far, the BSP has reduced interest rates by 50 basis points for two consecutive policy-rate setting meetings this year due to manageable inflation outlook as well as slower-than-expected global economic growth.
Tetangco warned that rising oil prices pose as an upside risk to the BSP’s inflation target of three percent to five percent.
“Forecast now is that price of oil will remain in elevated price level. That is an upside risk to inflation. We’ll have to consider all of these in assessing inflation outlook vis-a-vis monetary policy,” he explained.
The next policy rate setting of the BSP is scheduled on April 19.
According to him, the stance of monetary policy of the BSP remains appropriate.
“We can continue with that given that the inflation for February continues to be at the lower end of the inflation forecast. So that means that inflation is really manageable at this time and therefore we will continue to be supportive of growth,” he added.
Based on its assessment, Tetangco said the BSP’s inflation target of three percent to five percent would be breached if the average price of Dubai crude averages between $150 per barrel and $160 per barrel.
He explained that monetary authorities need to monitor what is happening to oil prices abroad due to developments in the Middle East and North African (MENA) states, what is happening in the US as well as the sovereign debt crisis in Europe.
“We will continue to monitor developments, particularly in the MENA and their impact on volatilities in international prices, to see if there is any need to adjust our policy stance,” he said.
The NSO reported yesterday that the annual inflation in National Capital Region (NCR) eased to 2.3 percent in February from 3.5 percent in January while inflation in areas outside NCR continued to decelerate to 2.8 percent from four percent.
The annual increase in food and non-alcoholic beverages index in the Philippines further slowed to 1.4 percent in February from 3.2 percent in January; alcoholic beverages and tobacco index, 4.7 percent from 5.6 percent; clothing and footwear index, 3.7 percent from 3.9 percent; housing, water, electricity, gas and other fuels index, 4.6 percent from 5.2 percent; furnishing, household equipment and routine maintenance of the house index, 2.1 percent from 2.4 percent; transport index, 3.9 percent from 5.5 percent; education index, 4.7 percent from 4.9 percent; and restaurants and miscellaneous goods and services index, 3.0 percent from 3.5 percent.
The communication index had a negative annual rate of -0.1 percent from -0.2 percent while that for recreation and culture went up to 2.6 percent from 2.5 percent. The annual rate for health index remained at 2.8 percent.
The annual inflation rate for food alone index in the Philippines further plunged to 1.2 percent from 3.3 percent in Janua - By Lawrence Agcaoili
