The Bangko Sentral ng Pilipinas said inflation rate in August likely eased further to as low as 1.3 percent from 2.4 percent in July due to lower prices of rice, fuel and power rates.
The BSP Department of Economic Research in a statement Friday saw the August 2019 inflation settling within the 1.3-percent to 2.1-percent range.
“Lower domestic prices for gasoline, diesel and kerosene, the continued decline in rice prices as well as the downward adjustment in electricity rates dampened inflation pressures during the month,” it said.
“These could be partly offset by the recent depreciation of the peso and higher prices of selected food items,” it said.
The BSP said it would remain watchful of economic and financial developments that could affect the inflation environment in line with its commitment to price stability conducive to long-term economic growth.
The policy-making Monetary Board of the BSP on Aug. 8 cut the overnight borrowing rate by 25 basis points to 4.25 percent, taking into account mainly the continued downward trajectory of inflation rate.
The interest rates on the overnight deposit and lending facilities were reduced to 3.75 percent and 4.75 percent, respectively.
The July inflation was also significantly slower compared with 5.7 percent a year ago. The figure brought the average in the first seven months to 3.3 percent, well within the government’s official target range of 2 percent to 4 percent for the year.
Inflation peaked to a nine-year high of 6.7 percent in September and October last year due to higher prices of rice and other food items. But it eased to 6 percent in November and 5.1 percent in December, as the immediate measures implemented by the government to curb excessive prices took effect.
The board last year hiked the policy rates by a total of 175 basis points contain the accelerating inflation rate. The raise was on top of the 200 basis-point cut in reserve requirement to 18 percent.
Earlier this week, BSP Governor Benjamin Diokno said another 25-basis point cut in policy rates to 4 percent could be expected before the year ends.
He also said credit and liquidity conditions in the country remained supportive of economic growth.
Diokno, in his presentation during the Economic Journalists Association of the Philippines forum in Manila this week, said credit grew 10.5 percent as of end-June 2019 while domestic liquidity expanded 6.4 percent during the same period.
“Notwithstanding the slower growth in loans for production activities, we continue to see sustained business demand on account of favorable macroeconomic conditions in the country, particularly with the easing of inflation in 2019,” Diokno said.
