Consumer prices likely rose by an average of between 4.1 and 5 percent in June due to the higher cost of food and recent hikes in tuition and public transport fares, according to the Bangko Sentral ng Pilipinas.
The month before, inflation stood at 4.5 percent, which was the highest in two and a half years.
The BSP said these cost pressures may be offset by lower power rates and the relatively strong peso, which makes imported goods cheaper for consumers.
Even so, the central bank chief said monetary authorities remained prepared to adjust policy settings to ensure price stability.
“We are watchful of domestic factors as well as external developments that could fuel second-round effects and fan any financial stability pressures,” BSP Governor Amando M. Tetangco Jr. said in a statement to reporters at the weekend.
“Over the policy horizon, inflation should still be within target, albeit closer to the upper band,” he added.
The BSP wants to keep inflation within its target range of 3 and 5 percent.
To counter rising prices caused mainly by food supply disruptions, the BSP has asked banks to set aside more of their clients’ deposits as reserves.
Yields on BSP special deposit accounts (SDA) were also raised across the board to encourage banks to park more cash with the central bank.
Monetary authorities, however, have held off on adjusting its benchmark overnight borrowing and lending rates, currently standing at record lows of 3.5 and 5.5 percent, respectively, since October of 2012.
For all of 2014, the forecast for inflation is an average of 4.4 percent.
“We will continue to mark developments to see which policy lever would be adjusted, if any is needed, so as to ensure our goals and price and financial stability remain within view,” Tetangco said.
Next year through 2016, the BSP’s target for inflation has been set at a lower range of 2 to 4 percent.
The same target may be set for 2017, BSP officials said last week.
Written By: Paolo G. Montecillo