Inflation edges up to 4.1% in April

MANILA, Philippines - The country’s inflation rate  picked up in April due to higher food and utility prices, the Philippines Statistics Authority reported yesterday.

In a report, the PSA said inflation stood at 4.1 percent last month, faster than the 3.9 percent recorded in March and the 2.6 percent in April 2013.

Without food or oil prices, core inflation accelerated to 2.9 percent in April from 2.8 percent in March.

Inflation in April fell within the Bangko Sentral ng Pilipinas’ forecast of 3.6 percent to 4.5 percent.

BSP Governor Amando M. Tetangco Jr. said the central bank will “not hesitate” to adjust policy settings should there be any risk that the rate will not fall within its target of three percent to five percent for the year.

“We remain watchful  for any financial stability risks from the still elevated liquidity growth rate, and continue to monitor the impact of our last action which took effect only mid-last month, as well as developments globally that could affect domestic inflation dynamics,” Tetangco said in a text message to reporters.

“We will not hesitate to make preemptive adjustments to any of our policy levers in measured pace if the inflation target would be at risk or financial stability pressure heighten,” he continued.

The central bank, mandated to keep prices stable and conducive to robust economic growth, revisits policy settings every six weeks. Its next rate-setting meeting is slated on May 8.

Looking at inflation by region, the rate in the National Capital Region picked up to 3.3 percent in April from 2.9 percent in the previous month. Areas outside the capital, meanwhile, saw the rate accelerate to 4.3 percent from 4.2 percent in March.

According to commodity group, the food and non-alcoholic drinks index rose to 6.2 percent in April from 5.8 percent in March, while the housing, water, electricity, gas, and other fuels index climbed to three percent from 2.7 percent. The transport index also accelerated to 1.3 percent from one percent in the previous month.

The increases in the three indices were offset by a decline in the alcoholic beverages and tobacco index to 4.1 percent from 4.9 percent and a slide in the clothing and footwear index to 3.3 percent from 3.7 percent.

The furnishing and household equipment also decreased to 2.4 percent from 2.8 percent, while the health index tumbled to three percent from 3.3 percent.

Rahul Bajoria, economist at Barclays, said in a research note yesterday that while inflation remains “firmly” within the BSP’s three percent to five percent target this year, the rate is expected to rise near the higher end of the range by the third quarter.

Bajoria said the central bank is forecast to increase the reserve requirement ratio by another two percent in the next two to three months, starting with this week’s meeting.

“This would help underline the central bank’s commitment to maintain price stability, as well as manage liquidity conditions,” Bajoria said.

 â€œIn our view, BSP will start raising rates in the June policy meeting, by delivering a 25bp (basis points) increase, as inflationary pressures rise further. We expect another 25bp rate hike in Q3 (third quarter), which would take the policy rate to four percent by the end of 2014,” he continued.

Overnight borrowing and overnight lending rates are currently at 3.5 percent and 5.5 percent, respectively.