August inflation to settle between 1.9% and 2.7% — Bangko Sentral

Inflation is expected to remain benign this month as lower electricity costs helped to offset higher oil prices and weaker peso, the Bangko Sentral ng Pilipinas chief said Thursday.

In a text message to reporters, Bangko Sentral Governor Amando Tetangco Jr. said the central bank sees inflation settling between 1.9 and 2.7 percent in August.

Inflation decelerated to 2.5 percent in July, the slowest in nearly four years, pulling the year-to-July inflation rate to 2.85 percent, and below the central bank's 3 to 5 percent target for 2013.

"Lower power charges could temper price pressures during the month," Tetangco said.

After finding power charges lower in July, customers of Manila Electric Co. again saw their bills go down by P0.35 per kilowatt-hour with a downward adjustments in the generation charge and cost components in August.

Price pressures for the month, meanwhile, stemmed from recent weather disturbances which caused supply bottlenecks as well as the "peso weakness and uptick and petrol prices."

Northern Philippines was battered by a string of typhoons in August.

The peso also sank to the 44 per dollar territory this month, or 8 to 10 percent weaker than the 40 to 41 levels earlier this year, stoking costs of imported goods that include oil.

This week, motorists faced another round of fuel price hikes following consecutive increases earlier in the

month.

Despite a benign inflation outlook, Tetangco maintained that monetary authorities remain on their toes to keep consumer prices in check.

“The BSP will nevertheless closely monitor incipient price pressures to help ensure that the economy runs as efficiently as possible," Tetangco said.

The policy-setting Monetary Board has kept policy rates at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending since October last year.

It also placed limits on the types of accounts that can park in Special Deposit Accounts — a tool to mop up excess liquidity.

The moves were staged to flush money into the economy and support growth. — VS, GMA News

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