THE Bangko Sentral ng Pilipinas (BSP) projects August 2024 inflation to settle within the range of 3.2 to four percent.
In a statement, the central bank said higher electricity rates and higher prices for agricultural commodities, owing to unfavorable weather conditions are the primary sources of upward price pressures for the month.
However, these factors are expected to be offset by lower domestic oil prices as well as lower rice, fish and meat prices along with the peso appreciation.
In July, inflation spiked to 4.4 percent from 3.7 percent in June but is within the BSP’s forecast range of four to 4.8 percent for the month.
The uptick in July inflation was traced mainly to non-food inflation, particularly higher electricity rates and upward adjustment in domestic prices of petroleum products.
Likewise, inflation for education services went up coinciding with the start of the school year. Food inflation also accelerated faster price increases of meat and fruits, while rice inflation remained elevated.
The BSP said the July inflation outturn is consistent with its projections that inflation will temporarily rise above target in July but could follow a general downtrend beginning in August.
On Aug. 15, the Monetary Board decided to cut interest rates by 25 basis points to 6.25 percent as inflation is projected to trend downward to within the government’s two to four percent target range despite the uptick in July.
The risk-adjusted inflation forecasts for 2024 and 2025 now stand at 3.3 percent and 2.9 percent, respectively.
The BSP said that inflation risks for 2024 and 2025 are more likely to decrease, mainly due to lower rice import tariffs. However, in 2026, there is a slight chance of inflation rising, driven by potential increases in electricity rates and external factors.
The Monetary Board expects domestic demand to remain strong. Despite tight financial conditions, second-quarter gross domestic product growth was solid, and unemployment has declined. Public investment, lower inflation and strong employment are expected to boost economic activity. / KOC