Inflation accelerated to a 27-month high of 3.3 percent in February from 2.7 percent in January, driven by higher prices of food and electricity and the depreciation of the peso against the US dollar, the National Economic and Development Authority said Tuesday.
The February rate was also the first time in more than two years that inflation breached the 3-percent mark. The last time inflation settled beyond the 3-percent level was in November 2014 when it hit 3.7 percent.
Neda director-general Ernesto Pernia said despite the possibility of inflation settling within the government’s target range of 2 percent to 4 percent for the year, risks to inflation outlook appeared to be tilted to the upside.
“This could drive inflation towards the higher end of the target,” Pernia said.
The February inflation brought the average in the first two months at 3 percent, at the middle of the government’s target range of 2 percent to 4 percent.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said the February rate confirmed the regulator’s expectations that the monthly path of inflation would move up and the average for the year would be within target. The February inflation was within Bangko Sentral’s forecast for the month at 2.7 percent to 3.9 percent.
“As the uptick is in line with forecast, there appears to be no immediate impetus to adjust the stance of monetary policy, but we will remain data dependent in our assessment and forthcoming decisions,” Tetangco said.
Tetangco said Bangko Sentral was closely monitoring different areas of possible price pressures, including petition for utility and fare rate adjustments, the impact of the Malampaya shutdown, the near-term impact of the comprehensive tax reform program and the market reactions to the looming interest rates hike by the US Federal Reserve this month and its assessment of the US economy.
“On the downside, we are looking at the growth in the rest of the global economy, which continues to be tentative,” Tetangco said.
Neda said faster price increases in rice, meat, fish and vegetables pushed up the food subgroup inflation to 4.3 percent in February 2017 from last month’s 3.6 percent.
For meat products, the country’s temporary ban on poultry imports from South Korea, Germany, France, Netherlands, Czech Republic, and Kuwait in response to the Avian Flu outbreak might have contributed to the limited supply, the agency said.
“Also, the higher rice prices can be attributed to lower rice stock inventories, which fell by 17.9 percent in January 2017 to December 2016, due to the contraction in palay production in the fourth quarter of 2016,” it said.
Price increases of housing, water, electricity, gas, and other fuels drove the non-food subgroup inflation to 2.5 percent in February 2017 from last month’s 2 percent.
“The risks to inflation that we see on the external side include increase in the price of oil and the depreciation of peso,” Pernia said.