March inflation seen stable at 3.5%

The Bangko Sentral ng Pilipinas (BSP) is expecting the March inflation to remain stable at 3.4 percent to 3.6 percent with the full impact of the latest transport fare hike expected to be felt in April.

In February, the nationwide inflation rate was recorded at 3.4 percent.

BSP Deputy Governor Amando M. Tetangco Jr. said the BSP’s simulations pegged the March inflation at 3.4 to 3.6 percent.

Tetangco said the BSP is still using its previous wage estimates since wages have not been adjusted according to the increase in transport rates.

Starting April 1, jeepney passengers will be paying an additional 75 centavos for the first five km. The minimum fare is still P4, but it is good only for the first four km.

The government approved the fare increase to avert a nationwide transport strike scheduled yesterday.

Although the inflation rate is expected to remain benign for the rest of the year, the BSP said the consumer price index (CPI) is projected to increase toward the end of the first half as prices of goods and services adjust to the increases in fuel prices.

The BSP said that the national average inflation rate is expected to remain benign until 2008, going up no higher than five percent in 2004 and 2005 before settling at three to four percent beginning in 2006.

According to the BSP, the expected moderate increase in 2004 and 2005 inflation reflected the impact of improved output growth and aggregate demand conditions as well as the expected cost-push impact of factors such as the volatility in oil prices.

At the same time, the BSP said the inflation outlook also considered the risks that stemmed from the financial market concerns over domestic political conditions in the run-up to the May elections that might influence the direction and movement of the foreign exchange rate as well as other financial variables.

For the first three months of the year, the average national inflation rate is still way below the projected 4.5-percent to 5.5- percent inflation, due mostly to the slowdown in economic activities that normally creates an upward push on domestic prices.

The BSP’s inflation target is the basis of its monetary policies, announcing the target that it had the commitment to meet over a two-year period.

"The target serves as an anchor for the public’s expectations about future inflation, allowing them to plan ahead with greater certainty," BSP Governor Rafael Buenaventura said.