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BSP sees Aug inflation at 6.6% to 7.1% |
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By Donnabelle L. Gatdula
The Philippine Star 09/01/2005 The Bangko Sentral ng Pilipinas (BSP) sees inflation at 6.6 percent to 7.1 percent in August, a top BSP official said yesterday. "Inflation forecast (of BSP) for August is 6.6 percent to 7.1 percent with the deceleration expected from a slower rise in food prices," BSP Governor Amando Tetangco Jr. said. The nationwide inflation rate was recorded at 7.1 percent in July. For the whole of 2005, the BSP has set an inflation rate target that is higher than that of the government projection. "Inflation will exceed the government targets of five to six percent for 2005 and four to five percent in 2006," the BSP said. The BSP said it would maintain its inflation targets of 7.9-percent for 2005 and 7.5 percent for 2006 as against government’s targets of five percent to six percent and four to five percent, for 2005 and 2006, respectively. "A prolonged period of price increases creates the risk that the public will come to believe that inflation will continue to remain high for the foreseeable future and continue to exceed the government’s inflation target," the BSP said. BSP Deputy Governor Diwa Guinigundo earlier said that the 7.9 percent inflation rate reflects assumptions that the expanded value-added tax (EVAT) will be implemented starting August this year. Since raising banks’ reserves by two percentage points last July 15, the BSP has been closely monitoring the release of funds into the financial system to keep inflation within target, a bank analyst said. The same analyst noted that the current inflation levels have been surpassing the BSP’s expectations and excess liquidity has been contributing to the inflation uptick. The BSP said oil prices are likely to remain high in the foreseeable future due to a continued strong demand in the US, China and India. "Expectations of continued rise in oil prices remain the central influence on the path of inflation, since the continuing presence of slack in the economy is likely to prevent an upsurge of demand-related pressures in the near-term. In particular, volatility in global oil prices may remain a key factor driving the inflation process. Moreover, the impending implementation of value-added tax reform law is also expected to raise inflation in the short-run," the BSP said. |
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