No 2nd round effects of higher food prices: BSP

By Kathleen A. Martin, The Philippine Star

Posted at Jun 28 2014 09:51 AM | Updated as of Jun 28 2014 05:51 PM

MANILA, Philippines - The Bangko Sentral ng Pilipinas said they have not observed any second-round effects to inflation, which could come through wage and fare increases, as consumer prices still remain manageable.

“We have not observed widespread second-round effects from the recent price pressures. The observed increases in the prices of some food items of late have been due largely to supply disruptions,” BSP Governor Amando M. Tetangco Jr., said in a text message to reporters.

“The relevant government agencies are addressing these supply bottlenecks and this is expected to help moderate the upward pull on prices,” Tetangco said.

Inflation surged to a 30-month high of 4.5 percent in May due to higher prices of food and non-alcoholic beverages, and increases in housing and utility rates.

The average inflation rate stood at 4.1 in the first five months of the year, above the midpoint of the central bank’s three to five percent target range.

“Meanwhile, the jeepney fare hike is limited to a few regions,” Tetangco said, adding “the most recent surveys (May 2014) suggest that inflation expectations remain within the target range.”

The Monetary Board, during its June 19 policy meeting, has forecast inflation to average 4.4 percent this year. The Board said risks to inflation outlook have been largely on the upside as weather conditions are seen increasing food prices and power price hikes remain pending.

“However, global oil prices have been increasing of late amid the tensions in Iraq. This is as a key source of risk to inflation as oil represents a major input cost in the production of most commodities,” Tetangco said.

“The BSP is keeping a close watch on evolving price and output dynamics that could affect the price-setting behaviour of economic agents. The BSP stands ready to undertake policy actions as necessary to prevent inflation expectations from unravelling,” Tetangco said.