BSP: July inflation driven by higher food prices, fares

Consumer prices likely remained elevated in July, Bangko Sentral ng Pilipinas (BSP) Governor Felipe Medalla said.

The BSP chief said inflation could have settled within the range of 5.6 to 6.4 percent. In June, inflation hit 6.1 percent.

“Inflation for the month was driven by the continued increase in food prices, further transport fare hikes, and peso depreciation,” Medalla said in a statement over the weekend.

“Meanwhile, lower oil prices, reduction in electricity rates in Meralco-serviced areas, and lower pork prices are likely to temper in part said price pressures,” he added.

Medalla also said the BSP will continue to vigilantly watch price pressures in the country to aid in their decision related to monetary policy.

“The BSP will continue to monitor closely emerging price developments to enable timely intervention to arrest emergence of further second-round effects, consistent with BSP’s mandate of price and financial stability,” he said.

In mid-July, the monetary board decided to raise the interest rate on their overnight reverse repurchase facility by 75 basis points to 3.25 percent, effective immediately.

This is the most aggressive monetary policy tightening move of the BSP since it adopted its inflation targeting framework in 2001, more than two decades ago.

Just last week, Medalla also assured markets of another rate hike in their scheduled meeting in August.

The BSP chief said the hike will be to the tune of 25 basis points or 50 basis points, depending on the latest data on the economy during that time.

“We can surprise people only once. So there will be no more off-cycle. As to how many more rate hikes before the end of the year, that will be very data dependent,” Medalla said.

“Come this August meeting, we can rule out zero and we can rule out 75 basis points. For the rest of the year, it all depends on what will happen in the outside forces,” he added.