BANGKO Sentral ng Pilipinas Governor Nestor Espenilla Jr. said he does not see the inflation rate hitting 6 percent, adding consumer prices may peak in August or September this year.
“In our forecast, we are not seeing 6 percent. It might be close to the last one [5.7 percent]. It is hard to predict,” Espenilla told reporters at the sidelines of an event in Manila.
He said inflation would continue to be driven by higher oil prices and increased excise taxes might contribute to faster inflation in the coming months.
“The August inflation may actually be higher than July. The peak may be in August or September,” Espenilla said.
He said if other goods—aside from food and fuel—would also be affected and register faster price increases, it would be a “red flag for the BSP.”
He, however, downplayed stronger monetary policy action from the Bangko Sentral if inflation accelerated further in the next two months, saying the decision of monetary authorities would always be guided by available data, not just inflation.
He said bringing the inflation down would be a combination of monetary policy actions, one of which was by raising interest rates.
Inflation in July further accelerated to 5.7 percent from 5.2 percent in June, bringing the first seven months’ average to 4.5 percent, or above the target range of 2 percent to 4 percent this year.
The Bangko Sentral was compelled to raise interest rates again in Aug. 9, the third time this year, by a rare 50 basis points to 4 percent in a bid to rein in inflation. The interest rates on the overnight lending and deposit facilities were also increased accordingly. The central bank earlier raised the policy rate by 25 bps each in May and June 2018.
Bangko Sentral data showed the last time the Monetary Board raised the policy rate by 50 bais points was in July 2008, when inflation reached 12.2 percent. It was also the time of the global financial crisis.
Espenilla said in deciding to raise the BSP’s policy interest rate anew, the board noted that latest baseline forecasts had shifted over the policy horizon, indicating some risk of inflation exceeding the target in 2019.