Inflation accelerated to 3.8% in Q1 —BSP

Inflation has accelerated to 3.8 percent during the first quarter of 2018 due to the uptick in prices of food items in light of the tax reform law.

In a press conference in Manila on Friday, Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo said headline inflation rose to 3.8 percent in January to March.

This compares with 3.0 percent on average recorded in the fourth quarter of 2017 and 3.2 percent in the first quarter of last year.

“Inflation pressures during the review quarter were traced mainly to higher price increases in selected food commodities, alcoholic beverages, and tobacco products,” Zeno Abenoja, BSP Department of Economic Research director, said during the briefing.

The first quarter inflation settled near the upper range of the BSP’s target of 2 to 4 percent for the year.

Guinigundo said the acceleration was “derived from supply side factors, which is expected to be transitory and therefore not persistent.”

The Tax Reform for Acceleration and Inclusion (TRAIN) law, signed by President Rodrigo Duterte in December, took effect in January. It lowered the personal income tax rates but raised the excise taxes on petroleum products, automobile, and sugar-sweetened beverages.

“Short-term inflation is one of the costs of the long-term goal of higher, more inclusive growth,” Guinigundo noted.

Present monetary policy settings are appropriate, given the prevailing outlook for inflation and economic activity.

“Despite ongoing price pressures, inflation remains in line with the target range over the policy horizon,” he said.

“Nevertheless, authorities see the balance of risks to the inflation outlook as remaining tilted toward the upside, which argues for maintaining vigilance in setting the stance of monetary policy going forward,” the BSP official noted.

The BSP remains watchful against any signs of second-round effects and broader based inflation acceleration, and stands firm in terms of intent to take immediate and appropriate measures to ensure the policy stance supports the BSP’s price stability objective, he said. —VDS, GMA News