Inflation to stay within expectations — Bangko Sentral survey

The risk factors to inflation this year are election spending, government infrastructure spending in line with projects under the private-public partnership program, and higher utility rates, according to analysts surveyed by the Bangko Sentral ng Pilipinas last March. However, inflation is expected to go slower this year and well within the 3 percent to 5 percent target for 2013 to 2015, the central bank said, citing results of the Bangko Sentral survey of private sector economists for March 2013 released over the weekend. “In particular, the mean inflation forecasts for 2013, 2014 and 2015 went down to 3.5 percent [from 3.6 percent], 3.8 percent [from 3.9 percent], and 3.7 percent [from 3.8 percent], respectively,” the the central bank noted. The probability distribution of the forecasts by 21 of 26 respondents showed a 69.6 percent chance that average inflation for 2013 would settle within 3.1 percent and 4 percent. In the first four months of the year, inflation averaged 3.05 percent, from the 3.075 percent a year earlier. Inflation last January settled at 3 percent, but accelerated to 3.4 percent in February on higher commodity prices. In March, food prices stabilized, and inflation slowed down to 3.2 percent. It then decelerated to 2.6 percent in April, a 13-month low since the 2.6 percent recorded in March 2012. On April 25, the policy-setting Monetary Board, citing a benign inflationary outlook, lowered by 50 basis points the interest rate on the Bangko Sentral's special deposit accounts (SDA) to 2 percent from 2.5 percent across all tenors, reflecting the third SDA rate cut for the year. The board also decided to keep policy rates at the record low levels of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending. The 18 percent reserve requirement ratio was also kept unchanged. Deputy Governor Nestor Espenilla noted the prospects for robust economic growth—apart from manageable inflation—were providing the scope for enhancing the efficiency monetary authorities to absorb liquidity in the financial system through the SDA facility.   The decisions in late April were in line with the efforts to fine-tune monetary policy tools for greater flexibility in monetary operations that ensure the right level of liquidity to keep economic activity whirring, said Espenilla. In January, the Bangko Sentral made the bold move of rationalizing the SDA rates at 3 percent across all tenors before fine tuning the rationalized rate down to 2.5 percent in March. — VS, GMA News