BSP pegs September inflation at 6.8%

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Metro Manila (CNN Philippines, September 28) — Filipinos may have shelled out more from their meager budget for goods and services in September, according to the Bangko Sentral ng Pilipinas (BSP)

In its monthly inflation forecast, the central bank pegged September's inflation at 6.8 percent, higher than the 6.4 percent in August. This could also be a new nine-year high for the rate of price increase.

"The BSP Department of Economic Research projects September 2018 inflation to settle at around 6.8 percent, with a range of 6.3 - 7.1 percent," the BSP said in a statement.

The central bank attributed its forecast to higher prices of fuel, agricultural commodities like rice due to typhoon Ompong, and the weak peso.

As of September 24, Ompong's damage to agriculture has reached P26.77 billion, according to the Department of Agriculture.

The peso also breached a new low at ₱54.31 versus the dollar on September 25, and has continued to trade within the ₱54 range.

The BSP noted that the effects of these inflationary factors could be partially offset by lower Meralco rates that month.

"Looking ahead, the BSP will continue to remain on guard to evolving inflationary conditions to ensure that the monetary policy stance remains consistent with our price stability mandate," the BSP said.

Meanwhile, the Department of Finance (DOF) believes prices may have risen by another 6.4 percent in September.

This slightly slower but still high inflation forecast, the DOF said, is due to higher food prices.

The DOF added that the back-to-back 50 point interest rate hikes of the BSP has helped temper rising prices. The BSP on Thursday announced that it had raised borrowing rates by another 50 basis points to 4.5 percent to tame inflation.

"Strong BSP monetary action backed by two successive 50 bp policy rate hikes and the President's support to administrative measures proposed by the Economic Development Cluster to remove non-tariff barriers on major food items will moderate food inflation in the short run," the DOF said.

Like the BSP, the DOF said that lower power rates could also partially offset rising prices.

"Policy reforms including rice tariffication and budget support for agricultural productivity programs will stem similar inflation episodes in the future," the DOF said on further methods to bring down prices.

The BSP and DOF inflation forecast are way above the official target of 2 to 4 percent,

The Philippine Statistics Authority will release its September inflation report on October 5.