By Lee C. Chipongian

Inflation could hit a low of two percent for the month of July with a stronger peso lessening price pressures, the Bangko Sentral ng Pilipinas (BSP) said.

centralbank with logo 2 - BSP sees 2-2.8% July inflation

MB file photo.

The BSP’s Department of Economic Research (DER) forecasts a July inflation range of two percent to 2.8 percent with rice and liquefied petroleum gas (LPG) prices on the low side during the period. The high end of the July forecast is not too far from June’s 2.7 percent inflation.

“Lower rice and domestic LPG prices along with downward adjustment in electricity rates and the recent peso appreciation are seen to temper inflation pressure during the month,” the DER said. The peso was mostly at the P51 level in July and broke that level more than once. The spot market is currently trading at P50.80:$1.

If July inflation does go up to 2.8 percent from June’s 2.7 percent, this will be because of adjustments in gasoline prices. “(Lower rice and LPG prices) could be partly offset by higher prices of petroleum and food items,” said the central bank.

The BSP’s 2019 inflation forecast was recently reduced to 2.7 percent from 2.9 percent earlier, and for 2020 it’s three percent from the previous 3.1 percent estimate. Based on the minutes of the June 20 Monetary Board policy meeting, projections were reduced due to the sharp decline in global crude oil prices and the peso appreciation, which it said “offset the faster liquidity growth resulting from the downward adjustments in the policy rate and reserve requirements.”

Besides cutting policy rate by 25 basis points (bps) last May 9, the BSP also reduced reserve requirements ratio by 200 bps by June 26.

“Looking ahead, the BSP will remain watchful of evolving inflationary environment to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” said the DER.

In a BSP survey of private sector economists, analysts expect lower inflation of 2.9 percent for this year and 3.2 percent for 2020. For 2021, the forecast was also lowered to 3.1 percent.

The survey said analysts continue to see manageable inflation and stable outlook with risks still broadly balanced.

As of end-June, inflation has averaged at 3.4 percent, within the government target of two-four percent.

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