Inflation to reach year-high in June — BSP

Inflation will likely climb to a year-high in June, according to the Bangko Sentral ng Pilipinas. BSP Gov. Amando Tetangco Jr. said higher tuition fees, cost of school supplies and government workers’ salaries will push inflation to the 4.6 percent-5.5 percent range. Last month, the consumer price index rose by 4.5 percent, the most so far this year. But it was at the lower end of the forecast band. In response, the BSP kept its policy rates steady at 4.5 percent for the overnight borrowing rate and 6.5 percent for the overnight lending rate. In lieu of higher interest rates, the BSP Monetary Board chose to use another tool in its arsenal of inflation-targeting measures. The policy board opted for a 1-percent increase in banks’ reserve requirement, affecting only the regular reserves component. That move took effect last June 24 and siphoned off P38 billion from the financial system. The BSP’s inflation target range this year is 3 percent-5 percent. From June onwards, Tetangco said the BSP will closely monitor the impact of the surges of foreign portfolio investments or “hot money" into the country. Net inflows increased by 160 percent to $2 billion in the first five months of the year. Actual inflows reached $7.79 billion from January to May while outflows, which were mostly of withdrawals from interim peso deposits, more than doubled to $5.78 billion from $2.77 billion. Tetangco said the slow recovery of the United States could make investors take their funds elsewhere, including the Philippines, which recently got a credit rating upgrade from Fitch Ratings. — ELR/VS, GMA News