Wage hike, higher oil, power costs add pressure to inflation

By Lawrence Agcaoili (The Philippine Star) | Updated October 9, 2017 - 12:00am
http://www.philstar.com/business/2017/10/09/1746776/wage-hike-higher-oil-power-costs-add-pressure-inflation

MANILA, Philippines — Higher power costs and oil prices as well as the recent wage hike would put an upward pressure on inflation in the fourth quarter, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said.

“While we expect negative base effects for October to December 2017, we expect inflation to remain at where they are considering the wage adjustments effective October and power or oil price increases,” he said.

Minimum wage earners in Metro Manila received an additional P21 per day in their base pay starting Oct. 5, bringing the daily minimum wage rate in the private sector to P512 from P491.

The consumer price index continued to accelerate in September, rising to a five-month high 3.4 percent from 3.1 percent in August due to faster increases in food prices.

This brought the average inflation to 3.1 percent in the first nine months of the year, still within the midpoint of the two to four percent target set by the BSP for 2017 to 2020.

Based on its assessment last Aug. 10, the BSP’s Monetary Board sees headline inflation averaging 3.2 percent between 2017 and 2019, within the two to four percent target set by the BSP.

“On the average, the next three years inflation rate are expected to remain close to the midpoint of two to four percent target,” Guinigundo added.

The increase in September was primarily due to the 3.6 percent annual growth recorded in the heavily weighted food and non-alcoholic beverages index. The annual growth of the food alone index at the national level was recorded at 3.7 percent.

Higher annual increments were registered by the alcoholic beverages and tobacco with 6.4 percent; clothing and footwear at two percent; housing, water, electricity gas and other fuels, 3.8 percent; transport, 4.8 percent; as well as restaurant and miscellaneous goods and services, 2.4 percent.

Excluding selected food and energy items, core inflation further moved up 3.3 percent in September from three percent in August.

Ealier, BSP Governor Nestor Espenilla Jr. said inflation would remain manageable despite the uptick last month and is expected stay within the two to four percent target set by the central bank.

“The BSP remains of the view that the inflation environment will continue to be manageable over the policy horizon after taking into account the latest assessment of price levels in September,” he said.

He said, firm domestic economic activity, sufficient liquidity and well-anchored inflation expectations continue to support current policy settings.

The benign inflation environment and robust domestic demand have allowed the Monetary Board to keep an accommodative policy stance as it last raised interest rates by 25 basis points in September 2014.

The BSP chief said authorities would to closely monitor emerging economic and financial developments to determine scope for further refinement of policy instruments.