Thursday, April 24, 2014

SC order on Meralco rate hike seen to diminish inflation risks

By Kathleen A. Martin (The Philippine Star) | Updated April 24, 2014 - 12:00am

MANILA, Philippines - The latest Supreme Court decision extending the stay order against Manila Electric Co.’s planned power rate hike will diminish the upside risks to inflation, Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said yesterday.

Tetangco told reporters in a text message the recent SC decision is not seen affecting the BSP’s inflation forecast for the year.

“Our latest baseline forecasts did not consider the power rate hike that is under the SC TRO (temporary restraining order). But we flag it is as an upside risk, given the uncertainty surrounding its resolution,” Tetangco said.

“Thus the forecasts are not affected but this will help lower upside risks – all things remaining the same,” he continued.

In March, the central bank revised its inflation forecast for 2014 to 4.2 percent, slower than the 4.3 percent projection announced in February.

It was lower than the 4.5 percent announced in December due to the delay in the implementation of Meralco’s electricity rate adjustment.

However, the forecast is still above the midpoint of the BSP’s three-to five-percent target range.

During the BSP’s last policy setting meeting last month, Tetangco said inflation expectations for this year until the next have remained manageable although the central bank continues to be watchful of potential price pressures.

Upside risks to inflation were identified to be Meralco’s petition for electricity rate adjustment and possible increases in food and oil prices.

Inflation eased to 3.9 percent in March from 4.1 percent in February due to lower price increases seen in housing, water, electricity, gas and other fuels.

This brought the three-month average to 4.1 percent, still above the midpoint of the central bank’s target range.

The BSP said it will be mindful of shifts in monetary policy settings in other economies, geopolitical risks, and world economic growth prospects that may have an impact on domestic inflation. source

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