BSP sees February inflation averaging 3.4% to 4.5%

Higher rice, sugar and bread prices may have pushed inflation up in February, according to the central bank, but the rise would not go higher than its forecast for the year. The Bangko Sentral ng Pilipinas (BSP) sees inflation averaging between 3.4 percent and 4.5 percent this month despite the uptick in the prices of basic commodities such as rice, sugar, and bread brought about by reduced supply caused by the El Nino weather conditions. BSP officer-in-charge Armando Suratos said in a text message to reporters that "inflation forecast for February takes into account possible inflationary pressures emanating from the price increases of several food items such as rice, sugar, and bread." Inflation slowed down for the first time in five months to 4.3 percent in January. It was below the BSP’s forecast of 4.5 percent to 5.4 percent. Mr. Suratos attributed the increase in rice prices this month to low supply since the harvesting season is over as well as to concerns of expected lower palay output due to the El Niño phenomenon. The BSP deputy governor also noted the rise in utility rates particularly power rates this month. However, Suratos pointed out that "the decline in the prices of fish, chicken, and vegetable as supply improved could temper the increase in the overall price level." Inflation eased for the first time in five months slowing down to 4.3 percent in January from an eight month high of 4.4 percent in December due to lower food prices. Actual inflation was lower than the central bank forecast of between 4.5 percent and 5.4 percent for January. The BSP has set an inflation target of between 3.5 percent and 5.5 percent this year as well as 3.0 percent and 5.0 percent next year from 3.2 percent last year. Latest forecast showed that inflation would average 4.7 percent this year and 3.3 percent next year. "For 2010, our baseline estimate continues to indicate that inflation would settle comfortably within the inflation target, 3.5 percent to 5.5 percent. Preliminary forecast for 2011 would settle also within the 3.5 percent target range," Suratos said. He pointed out that benign inflation helps monetary authorities maintain its current policy settings. "This confirms our view that current interest rate settings are broadly appropriate and monetary policy can continue to aim at maintaining the momentum of demand in economic activity while being closely attentive to signs of inflationary pressures," Mr. Suratos said. -- GMANews.TV