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Inflation rate steady at 7.6% in March |
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By Des Ferriols
The Philippine Star 04/06/2006 Consumer prices rose 7.6 percent in March, the same pace as the month before, the National Statistics Office (NSO) reported yesterday. The cost of fuel, electricity and water rose after the government raised the expanded value-added-tax from 10 to 12 percent in February, the NSO said. The March rate of 7.6 percent was at the top end of the Bangko Sentral ng Pilipinas (BSP) target of between 6.9 percent and 7.6 percent. Core inflation, which excludes selected food and other volatile energy items, increased to 6.5 percent in March. For the first three months, inflation averaged at 7.3 percent. The BSP said the March inflation rate would still give the Monetary Board some room for flexibility but possible risk factors relating to the growth in domestic money supply and external surplus are now being watched closely. The MB is scheduled to meet on Thursday to evaluate its current policy stance but BSP Governor Amando M. Tetangco Jr. expressed confidence that the March inflation rate would give the board reason to keep its policy rates at present levels. "This gives the MB some elbow room as far as policy stance is concerned particularly given the positive performance of the peso against the dollar," Tetangco said. "But we need to continue to watch possible risk factors including developments on the liquidity front with the sustained external surplus," he added. On Tuesday, the peso climbed to a one-month high of 50.95 to the dollar on the lack of strong dollar inflows from overseas Filipino workers. Yesterday, the peso closed at 51.09 to the dollar, down slightly from Tuesday’s close of 51.045. The BSP has so far kept its policy rates unchanged, with the overnight borrowing rate 7.50 percent and the overnight lending rate at 9.75 percent. Tetangco said declining pump prices would slowdown the increases in the prices of basic commodities which had suffered for months due to record high oil prices. Although basic agricultural products are exempted from the VAT, the consumer price index also includes fuel costs as well as processed foods and shelter. The BSP uses the inflation rate to determine its monetary policies in terms of how much liquidity it intended to keep in the system or to mop-up. Although the BSP has already conceded that it would miss its inflation target in 2006, Tetangco said the target for 2007 was still four to five percent. This indicates that the BSP would either take an aggressive stance to curb inflation and bring it down drastically by 2007 or take a softer stance to bring it down slowly. "It’s a matter of trajectory," Tetangco explained. "If inflation is high this year and we want to bring it down to the target level by 2007, then the stance would be more aggressive." |
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