Fuel, education, electricity costs stoked PHL inflation in June — economists

Consumer prices likely rose at a faster pace last month on higher fuel, electricity and education costs, analysts polled by GMA News Online said.

The median inflation forecast of eight economists was 2.75 percent in June, within the Bangko Sentral ng Pilipinas' (BSP) 2 to 2.9 forecast for the month.

Inflation data is expected to be released Friday, July 5.

“Much of the increase can likely be attributed to annual fare and fee increases in June, particularly for electricity and education,” said

Jeff Ng, economist at Standard Chartered (StanChart) in Singapore.

Emilio Neri Jr., lead economist at Bank of the Philippine Islands (BPI) said, “Fuel price hikes in the previous month on peso weakness and higher world prices also contributed to faster inflation.”

Manila Electric Co. hiked rates by P0.22 per kilowatt-hour (kWh), while over 300 universities and colleges and at least 903 private preschools, elementary and high schools raised their respective tuition fees.

Last month, oil firms raised prices of petroleum products, citing higher prices of world crude. The peso was also trading at the 43 per dollar territory, lower than the 40 to 41

per dollar level earlier this year.

Inflationary pressures, however, were “more than offset by stable food prices,” said Security Bank economist Patrick Ella.

Benign inflation for 2013

Economists also forecast the full-year inflation at a median 3 percent, or at the lower end of Bangko Sentral's 3 to 5 percent target for the year and

lower than its 3.1 percent projection.

“With the global economy not showing any meaningful signs of a pickup, any increases in commodity prices in the coming months are likely to be muted,” said Singapore-based economist for DBS Bank Ltd. Eugene Leow.

The weak peso is prodding import costs higher and weather disturbances that cause food supply bottlenecks are adding upside risks to inflation, according to economists.

“Given that the peso is now trading weaker relative to the dollar, the high exchange rate can help prop up inflation in the coming months,” said Jackson Ubias, Institute for Development and Econometric Analysis executive director.

Ildemarc Bautista, research head at Metropolitan Bank and Trust Co., noted the a weak peso is like a fan that stokes the cost of imported products like fuel.

BPI's Neri said the rainy season may also pose “a potential supply bottleneck which could add inflation pressures.”

Impact on monetary policy

Analysts agreed: benign inflation would keep policy rates untouched at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending.

“The central bank is likely to maintain a neutral stance in July and keep key policy rates on hold,” said StanChart's Ng.

However, their respective opinions are mixed on whether the central bank will slash yields of special deposit accounts (SDA)—a monetary tool to mop up excess liquidity.

“Lowering SDA rates at a time of market turbulence and external slowdown is a logical move for the BSP at this point without compromising the current monetary policy rate settings in the overnight market,” said Security Bank's Ella, forecasting another SDA rate cut as early as this month.

Jun Trinidad, economist at Citi Philippines, said currency weakness in the region “officially marks an end to SDA easing.”

Since January, the yields on SDA placements was already cut thrice to 2 percent.

A higher yield against other investment instruments mops up liquidity in the financial system, while a lower rate flushes money out into the economy. — VS, GMA News

Loading...

Editor’s note:Yahoo Philippines encourages responsible comments that add dimension to the discussion. No bashing or hate speech, please. You can express your opinion without slamming others or making derogatory remarks.

  • Billionaire finds wreck of WWII ship in Phl
    Billionaire finds wreck of WWII ship in Phl

    Microsoft co-founder Paul Allen says he has found the Japanese Navy’s biggest warship at the bottom of the sea in the Philippines, 70 years after US forces sank it. Allen posted a photo on Twitter on Tuesday of the World War II battleship Musashi’s rusty bow, which bore the Japanese empire’s Chrysanthemum seal. The American billionaire, who has also pursued space exploration, said his luxury yacht and exploration ship, the M/Y Octopus, found the Musashi one kilometer (1.6 miles) deep on the …

  • 8 of 10 cities most at risk from natural disasters located in Phl – study
    8 of 10 cities most at risk from natural disasters located in Phl – study

    Eight of 10 world cities most exposed to natural hazards are in the Philippines and more than half of the 100 cities most exposed to earthquakes, storms and other disasters are in four Asian nations, according to a research. The study, published on Wednesday by risk analysis firm Verisk Maplecroft, analyzed the threat posed by storms, floods, earthquakes, tsunamis, fires, volcanoes and landslides in more than 1,300 cities. The study found that the 10 cities most at risk are Port Vila in …

  • Miriam bucks house arrest for Enrile
    Miriam bucks house arrest for Enrile

    Sen. Miriam Defensor-Santiago believes granting Senate Minority Leader Juan Ponce Enrile house arrest, while former President Gloria Macapagal-Arroyo remains under hospital detention, will violate the equal protection clause of the Constitution. “That’s already a violation of the equal protection of the law,” she said. …

  • World's oldest person wonders about secret to longevity too
    World's oldest person wonders about secret to longevity too

    TOKYO (AP) — The world's oldest person says 117 years doesn't seem like such a long time. …

  • UNA hits PNP selection process
    UNA hits PNP selection process

    The United Nationalist Alliance (UNA) hit yesterday the apparent machinations in the selection of the new Philippine National Police (PNP) chief. Navotas Rep. Toby Tiangco, UNA interim president, said the administration and the ruling Liberal Party (LP) are perpetuating the bata-bata or patronage system in the selection process of the police chief. “They will start this by maneuvering the appointment of Gen. Garbo as PNP chief,” said Tiangco, referring to one of the top contenders for PNP …

  • Pacquiao: Mayweather is the fight of my life
    Pacquiao: Mayweather is the fight of my life

    Manny Pacquiao called his boxing showdown with Floyd Mayweather “the fight of my life” as he got down to work pounding the streets and gym in Los Angeles. On Monday, Pacquiao ran two miles (3.2 km) and shadow-boxed for two rounds, followed by abdominal work and breakfast of steamed rice, scrambled egg, fish and chicken broth. Then he napped until noon and had lunch before heading to trainer Freddie Roach’s Wild Card Gym, which is strictly off-limits to fans and media during Pacquiao’s …

  • Ohio mom, boyfriend guilty; child emailed teacher for help

    PORTSMOUTH, Ohio (AP) — A woman and her boyfriend pleaded guilty to raping her young children and were sentenced to prison on Wednesday, a year after one of her daughters emailed a teacher for help and said she and her siblings were being chained to their beds, deprived of food and sexually assaulted. …

  • New Moro rebel group emerges
    New Moro rebel group emerges

    A radical Muslim cleric trained in the Middle East and considered one of the leaders of the Bangsamoro Islamic Freedom Fighters (BIFF) has broken away from the terror group to form his own band of jihadists who are now reportedly providing sanctuary to bomb expert Basit Usman and at least five foreign militants, the military said yesterday. Armed Forces of the Philippines (AFP) spokesman Col. Restituto Padilla, citing reports from the field, said the Justice for Islamic Movement (JIM) was …

POLL

Should Aquino be held accountable over the Mamasapano operations?

Loading...
Poll Choice Options