June inflation to settle below target, says Bangko Sentral chief

Inflation, or the rise in consumer prices, may settle below the central bank's target this month on decreased costs of select food items offsetting peso weakness and higher tuition and electricity prices, the Bangko Sentral ng Pilipinas chief said Thursday.

“The BSP projects June inflation to settle within 2 to 2.9 percent considering the tuition fee increases, upward adjustments in electricity charges, peso weakness against the impact of lower prices of select food items,” central bank Governor Amando Tetangco Jr. said in a text message to reporters.  

The peso is currently trading at the 43 per dollar territory, weaker than the 40 to 41 to-a-dollar levels it moved at earlier this year. A weaker peso stokes prices of imported goods like fuel.

Customers of Manila Electric Co. saw their bills increase by P0.22 per kilowatt-hour (kWh) this month on higher generation and transmission charges and taxes, while over 300 universities and colleges and 260 private elementary and high schools hiked their tution.

Inflation in May was unchanged at 2.6 percent, pulling the five-month tally to average at 3 percent.

Tetangco said, “Over the policy horizon, inflation is expected to remain manageable falling within the target range” of 3 to 5 percent in 2013.  

On Wednesday, Tetangco hinted that policy rates could remain low given the benign inflation outlook.

The central bank chief, however, said monetary authorities will remain on their toes for any developments that could fan inflation.

“BSP will closely monitor evolving domestic and global developments. We will adjust the policy stance as and when needed,” he noted.

Policy rates—which serve as benchmark for bank loans—are at record lows of 3.5 percent for overnight borrowing and 5.5 percent for overnight lending since October. — BM, GMA News