BSP, analysts expect inflation to hit 9-year high in August

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Metro Manila (CNN Philippines, August 31) — Inflation may have hit its highest mark for almost a decade this month.

Economists from the Bangko Sentral ng Pilipinas (BSP) peg inflation to fall at 5.9 percent, or between 5.5 to 6.2 percent in August. This would put inflation at its highest in nine years.

"Higher price of rice and key food items due to weather disturbances and supply disruptions, increase in gasoline and LPG (liquefied petroleum gas) prices, and slight upward adjustment in electricity rates in Meralco-serviced areas contributed to upward price pressures in August," the BSP said in a statement.

On the other hand, the BSP said lower diesel and kerosene prices could temper inflation. It added the peso was not as volatile in August as it was in previous months.

"Lower diesel and kerosene prices as well as modestly appreciated peso could partly temper price pressures this month," the BSP said.

 

Most analysts polled by CNN Philippines' Business Roundup also expected inflation to fall at the 6 percent mark.

Guian Dumalagan, market economist for Land Bank of the Philippines, said that the Tax Reform for Acceleration and and Inclusion (TRAIN) law and a weak peso still affected this month's inflation.

"The continued effect of the TRAIN law, which raised prices of fuel, automobile, mineral, and coal, as well as the further weakening of the peso against the greenback may have boosted local inflation," Dumalagan told CNN Philippines.

Professor Bernardo Villegas from the University of Asia and the Pacific, on the other hand, pegged inflation at a lower rate of 5 percent, citing "more aggressive policies of the BSP to raise interest rates and lowering of world oil prices."

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The Monetary Board, the policy making arm of the BSP, raised interest rates by 50 basis points in August to 4 percent to temper rising prices.

Budget Secretary Benjamin Diokno shrugged off the inflation forecast.

"I've seen inflation much higher than this. Ang nature ng inflation kasi, yung base effect, if inflation is high now, next year babagsak yan definitely," Diokno told reporters Friday.

[Translation: The nature of inflation is there's a base effect. If inflation is high now, then next year it will definitely fall.]

The Philippine Statistics Authority will release the August inflation data on September 5. 

CNN Philippines correspondent Rex Remitio contributed to this report.