BSP projects even higher prices in May

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FILE PHOTO. The rise in prices of widely-used goods will likely be at its fastest pace in August or September, a central bank official said.

Metro Manila (CNN Philippines, May 31) — Prices of basic goods and services may have risen even higher in May, the Bangko Sentral ng Pilipinas (BSP) said Thursday, ahead of actual inflation figures coming out next week.

The BSP projects inflation settling at 4.6 to 5.4 percent in May, higher than April's 4.5 percent which was a five-year high. The inflation rate uses the 2012 price as benchmark.

The central bank attributed its projection to higher fuel and rice prices.

"Higher domestic petroleum prices amid geopolitical tensions in the Middle East as well as the sustained increase in rice prices present upward price pressures for the month," the BSP said.

Peaking above $80 per barrel in recent weeks, a CNN report states global oil prices have declined in recent days after the Saudi Arabian oil minister said they are in intensive discussions with Russia and the Organization of Petroleum Exporting Countries (OPEC) about producing more oil to ease global supply concerns. Saudi Arabia is the biggest oil exporter in the world and de facto OPEC leader.

Rice prices also spiked as the government ran out of cheap rice, prompting a decision to import the staple sooner than later.

On the other hand, lower power rates from Meralco-serviced areas, and lower prices of fish and fruit could partially offset the impact of rising prices, the BSP said.

Inflation in April reached a five-year high of 4.5 percent. The National Economic and Development Authority said this was caused by an initial reaction to the implementation of the Tax Reform for Inclusion and Acceleration (TRAIN) law.

READ: Commodity prices continue to rise in April

Meanwhile, the Department of Finance defended its tax reform program, saying the TRAIN accounted for only 0.4 percent of inflation in April.

READ: DOF: TRAIN Law not the primary cause of five-year high inflation

"This means that regardless of whether we imposed the TRAIN law, the prices of fuel will still go up," Finance Assistant Secretary Paola Alvarez told CNN Philippines' Newsroom yesterday.

The TRAIN law, which was implemented in January 2018, imposed additional taxes on alcohol, tobacco, fuel, and sugary drinks while lowering personal income tax. Additional revenues will fund the administration's ambitious infrastructure program.

The BSP responded to the rising prices by adjusting interest rates.

READ: BSP raises interest rate to address rising prices

"Going forward, the BSP will remain watchful of evolving price trends and ensure that the monetary policy stance remains appropriate to maintain price stability that is conducive to a balanced and sustainable economic growth," the BSP said in a statement.

In its last policy meeting in May, the BSP's policy-making Monetary Board raised interest rates to 3.25 percent from 3 percent in the wake of inflation exceeding the government target of 2 to 4 percent.