Prices of goods hit new five-year high in July

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Metro Manila (CNN Philippines, August 7) — Prices of goods and services continue to go up in the country's inflation, climbing to a new five-year high of 5.7 percent in July, the Philippine Statistics Authority (PSA) announced today.

The figure broke last month's record high of 5.2 percent, which was more than twice the 2.4 percent posted in June 2017.

The PSA attributed the uptrend to the 7.1 percent rise in the prices of food and non-alcoholic beverages. In June, the uptick was at 6.1 percent.

Economic managers of the Duterte administration issued a joint statement on the matter, reiterating that inflation is expected to taper off by the end of the year.

"Part of the supply problem is the country's declining rice stock inventory -- caused by weather disturbances in the country and in other rice-producing countries like Thailand and Vietnam -- which is taking a toll on the prices of rice," said the joint economic team, composed of Finance Secretary Carlos Dominguez, Socioeconomic Planning Secretary Ernesto Pernia and Budget Secretary Benjamin Diokno.

To address the issue, they called for the amendment of Republic Act No. 8178 or the Agricultural Tariffication Act, to put in place rice import tariffs instead of quantitative restrictions. The move, the managers said, would bring down the price of rice.

The bill for rice tariffication is also one of the priorities stated by President Rodrigo Duterte during his 2018 State of the Nation Address.

Presidential Spokesperson Harry Roque said that Duterte will go after rice hoarders and cartels, who artificially inflate the price of rice.

"And that's why the President has made it very clear, he will use the full power of the state to break open if need be the warehouses of rice hoarders," Roque said in a press briefing Tuesday.

He added that President Rodrigo Duterte was going to use police power to force open warehouses where suppliers may be hoarding rice to manipulate prices in local markets.

Alcoholic beverages and tobacco prices also climbed to 21.5 percent, the highest among the basket of goods which grew to 20.8 percent the previous month.

Prices for utilities such as water, electricity and gas also went up to 5.6 percent, transport to 7.9 percent, and health to 3.7 percent.

In contrast, the price of education went down to -3.9 percent.

Inflation in the National Capital Region was likewise higher at 6.5 percent for the month, and outside Metro Manila the rate was at  5.5 percent.

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The July inflation rate fell within the Bangko Sentral ng Pilipinas (BSP) forecast range of  5.1 to 5.8 percent, but exceeded that of economists polled by CNN Philippines which averaged 5.47 percent.

"The July 2018 actual inflation is at the high end of our July forecast but remains consistent with our expectation of elevated inflation prevailing in 2018 that will return to the target range by 2019," BSP Governor Nestor Espenilla said.

Espenilla said that the policy-making Monetary Board would consider the data in its next meeting on Thursday.

He also said the BSP remains committed to meet its inflation target of 2 to 4 percent for the entire year.

Japan-based think tank Nomura Global Markets Research expects inflation to peak in September or October. With this, Nomura expects the BSP to raise interest rates by another 100 basis points to 4.5 percent by the end of the year.

"With BSP increasingly citing the currency as adding to inflation risks, real rates would be an important policy consideration for BSP to tighten further to contain capital flow pressures against the widening current account deficit and a weaker external backdrop," Nomura said in a statement.

CNN Philippines' Luchi de Guzman contributed to this report.