High food, fuel prices boost inflation to a 14-year record

MANILA, Philippines - Persistent increases in fuel and cereal prices have caused the Philippines’ inflation rate to hit a 14-year high, the country’s socioeconomic planning body said. However, the National Economic and Development Authority (NEDA) issued an assurance that June’s inflation rate of 11.4 percent “is still within the target of the Bangko Sentral ng Pilipinas’ projection of 7 to 9 percent for the whole year." Besides boosting the country’s average inflation rate to 7.6 percent for the first half, last month’s inflation—higher than May’s 9.5 percent—exceeded BSP’s expectations. Higher than expected increases in consumer prices will add pressure on the Bangko Sentral ng Pilipinas (BSP) to lift interest rates, an economist said on Friday. Benjamin Diokno, a former budget secretary and currently an economics professor at the University of the Philippines, said the country’s monetary authority must take action to shield the poor from high prices of goods and services. “For the poor, the suffering deepens as food inflation goes up to 17.4 percent and rice inflation soars to 43 percent. The pressure for the BSP to take a bolder move intensifies," he said. With June’s inflation figures, “it can’t be business as usual for the Philippine economy," Diokno said. The BSP, which is tasked to maintain price stability, is all set to meet on July 17. In a bid to control unrelenting hikes in consumer prices, the Philippines’ monetary authority has increased lending rates last month, its first rate hike in two years. The move has put brakes on the country’s economic expansion, which grew the fastest in more than three decades last year. While the rate hike will also make housing and car loans more expensive, the policy action will also help cut the amount of cash in the financial system. In doing so, the move is expected to curb domestic demand, slowing down the pace of increases of goods and services. Earlier, the International Monetary Fund has criticized the BSP for being “behind the curve" in controlling inflation, indicating that the latter may have been too slow in taking action. For his part, newly-designated Civil Service Commission Chair Ricardo L. Saludo said that the average inflation rate under the Arroyo administration is “still lower than previous administrations." “Before up to 2006 and even 2007, the inflation rate under the Arroyo administration has averaged about 5.5 percent," Saludo, outgoing Cabinet Secretary, said in Malacañang on Friday. “If you compare that with previous administrations, it is the lowest. The Aquino, Ramos and Estrada administrations all had average inflation rates much higher than that." Saludo also emphasized efforts to “work together to boost domestic production of food, conserve energy to minimize our own costs in the escalating global energy regime, and develop alternative and indigenous energy sources which the government has also been promoting." The NEDA added that core inflation rate also went up 6.6 percent for the month from 6.2 percent the previous month. “The prices of cereals increased to 42.2 percent from 31.4 percent last month with both rice and corn significantly higher than year-ago prices," the agency said, citing figures given by the National Statistics Office (NSO). “Fuel increased from 18.2 percent to 22.0 percent while transportation and communication increased from 8.6 percent to 12.4 percent as Dubai oil prices for June reached $127.82 per barrel from $119.50 per barrel in May, a significant increase of about $8.00 per barrel. With the opening of classes, educational services (8.5%) also provided significant upward pressure on inflation," NEDA Director-General Augusto B. Santos said in a statement. The inter-agency Development and Budget Coordination Committee is targeting to curb the rise in consumer prices this year at 3 percent to 5 percent. The BSP, on the other hand, is seeking to control inflation at 7 percent to 9 percent. “Except for the fuel, light and water (FLW) index, all the commodity groups recorded higher annual inflation rates during the month. Inflation a year ago was 2.3 percent," the NSO said. The NSO added that core inflation, which excludes selected food and energy items, consumer prices climbed by 6.6 percent from the previous month’s 6.2 percent. In Metro Manila, headline inflation was at 9.2 percent. - GMANews.TV