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Philippines: Consumer prices soar to a 5-year high in April, overshoot target

  • May 04, 2018

MANILA, Philippines — The overall increase in prices of key consumer items blew past target to hit a fresh peak in April on the back of higher transport costs and rising prices of “sin” products, the government reported Friday.

Using 2012 as base year, inflation last month accelerated to 4.5 percent, the fastest pace in at least five years but within the government’s 3.9-4.7 percent forecast for the month.

The latest inflation figure brought the year-to-date tally to 4.1 percent, breaching the Bangko Sentral ng Pilipinas’ 2-4 percent target range.

Among commodity groups, prices of alcoholic beverages and tobacco surged the fastest at 20 percent, followed by transport at 4.9 percent.

Meanwhile, the food index eased to 5.5 percent in April.

The Duterte administration’s tax reform law—which lowers personal income taxes while raising excise levies on fuel and cigarettes, among others—has been blamed for the recent jump in prices of widely used goods and services.

The BSP projects inflation to hit 3.9 percent this year and cool down to 3 percent in 2019.

On Thursday, BSP Governor Nestor Espenilla struck a hawkish tone, saying monetary authorities won’t think twice to take “decisive” action should inflation remains elevated.

“What we react to is whether it’s spreading and it is affecting expectations. And our reading, based on the latest data, it seems to have spread somewhat,” Espenilla said.

But for Union Bank chief economist Ruben Carlo Asuncion, policymakers might not tweak key rates yet after the food index moderated last month.

“With regard to the probable hike, I’m expecting the food index to move up as well to consider a broad-based upward pace of inflation. The easing might be a reason not to hike yet,” Asuncion said.

“At this point, June might be the potential hike, but not this May. Again, the BSP will have to look into the spread of inflation,” he added.

The BSP’s Monetary Board will hold their next rate-setting meeting on Thursday, just a week after the release of April inflation data and on the same day as first-quarter gross domestic product data.

Policy settings have been unchanged since September 2014.

Source: https://www.philstar.com/business/2018/05/04/1812112/consumer-prices-soar-5-year-high-april-overshoot-target#Sc23rlVJIeJdTLuA.99