Higher-than-expected inflation rate last November and rising oil prices played major factors in the Bangko Sentral ng Pilipinas' (BSP) decision to increase average inflation projections for 2017 and 2018.
In a briefing Thursday, BSP Deputy Governor Diwa Guinigundo said the central bank's policy-making Monetary Board (MB) now sees inflation to average at 3.3 percent in 2017 and three percent the following year.
These were at three percent and 2.9 percent for 2017 and 2018, respectively, during the meeting of the Board last November 10.
The Board, on the other hand, maintained the 1.8 percent average inflation projection for 2016.
Rate of price increases last November rose to 2.5 percent from month-ago's 2.3 percent, bringing the year-to-date average to 1.7 percent.
The central bank earlier projected November inflation to range between 1.6 and 2.4 percent.
Guinigundo said oil prices as well as futures were also rising.
The MB's 2017 Dubai crude oil assumption is USD40-55 per barrel, USD45-60 per barrel for 2018 and USD50-65 per barrel for 2019-22.
Guinigundo said weaker exchange rate, with the peso now trading at 49-level to a dollar from 47-level earlier this year, was also a negative factor as it provided inflation pressure.
But he said that balance of risks was tilted on the upside given the pending power rate hike adjustment, the pending bill calling for higher excise tax on auto and fuel and the tax package proposal of the Department of Finance (DOF)
He said the weak La Nina projected in the first quarter of next year and a neutral weather in the succeeding quarters "will keep agriculture safe."
Similarly, the BSP has set the 2019-20 inflation target between two and four percent, same as the 2015 to 28 target range.
"We believe that disinflationary trends will continue," he said, citing that oil prices is seen to rise even with the agreement of Organization of the Petroleum Exporting Countries (OPEC), with the exemption of some members, to cut production.
Guinigundo said some non-OPEC member countries had also joined the production cut bid but some did not as a market protecting move "to protect their market share."
He said the assurance that production cut would not be that much provided stability on prices, thus, oil prices was seen to remain stable.
Source: Philippines News Agency