March inflation eases at 4.5%

The sustained increase in the cost of goods and services in the country slightly eased in March as the Philippine Statistics Authority (PSA) reported such at 4.5 percent from last month’s 4.7 percent.

Still, the latest figure proved to be a significant jump from the posted 2.5 percent inflation rate in March 2020.

National Statistician Claire Dennis Mapa said that inflation for the first quarter of the year averaged at the same 4.5 percent, notably higher than the government’s 2 to 4 percent target for the year.

According to him, the lower print in March could be owed to the slower increase in the prices of food and non-alcoholic beverages, which comprise 91.6 percent of the overall basket.

Inflation in the National Capital Region (NCR) went down to just 3.7 percent in March 2021 from the recorded 4.1 percent month-ago while areas outside NCR likewise eased to 4.7 percent from 4.8 percent in the same comparable period.

Meanwhile, inflation for the bottom 30 percent income households remained at 5.5 percent in March 2021, but notably higher than the 2.4 percent in March 2020.

Within expectations

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said that inflation remains within expectations as such proved to settle within their forecast range.

“The overall latest outturn is consistent with expectations that inflation could settle above the high end of the target in 2021, reflecting the impact of supply side constraints on domestic prices of key food commodities,” Diokno explained.

“Nevertheless, inflation is still seen to return to within target band in 2022 as supply side influences subside. At the same time, timely and effective implementation of direct measures by the national government could contribute to easing price pressures,” he added.

According to him, the balance of risks to inflation outlook remains broadly balanced for the year, with a downside bias for 2022.

While at it, the BSP chief said that the Monetary Board deems current monetary policy settings appropriate in supporting the state’s efforts to facilitate economic recovery.

Finance Secretary Carlos Dominguez III said during a live television interview that their 2 to 4 percent target remains as they expect inflation to further decline in the coming months.

BSP Deputy Governor Francisco Dakila Jr. earlier revealed a higher inflation assumption for 2021, from only 4 percent to 4.2 percent before easing to 2.8 percent in 2022.

Policy stay still seen

Nicholas Mapa, senior economist at the ING Bank offered his view that the central bank would likely keep current monetary policy settings as it is, looking through the inflation breach.

“Monetary authorities remain hopeful (that) inflation will decelerate once supply-side remedies to African swine fever take root although the latest central bank inflation forecasts peg inflation to settle above target in 2021,” Mapa explained.

“Nonetheless, we expect BSP to keep policy rates at 2 percent in order to bolster the economic recovery, with several regions now under strict lockdown due to a recent spike in COVID-19 infections,” he added.

Mapa likewise echoed the central bank’s statement that evidences of second round effects will trigger the regulator to finally recalibrate its monetary policy.

“Receding concerns about inflation may calm the Philippine bond market in the near term while the peso is expected to outperform regional peers as soft import demand limits depreciation pressure,” he said.

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