A manageable rise in consumer prices as measured by the inflation rate will boost domestic demand and counterbalance weaker global growth, according to the latest economic bulletin from the Department of Finance.
In his report to Finance Secretary Carlos Dominguez, DoF Undersecretary Gil Beltran said the “short-term outlook suggests inflation will likely be benign. This will give economic policy makers more room for maneuver to sustain economic growth and temper external shocks.”
Earlier, the Philippine Statistics Authority announced that headline inflation stayed flat at 1.9 percent in July, similar to the DoF’s forecast for the month.
Beltran attributed this to the slowdown in the price growth of food, transportation, and education which effectively dampened the uptick in housing, utilities, and fuel prices.
The July inflation rate was within the forecast of 1.5 percent to 2.4 percent by the Bangko Sentral as well as the median market expectation of 1.9 percent.
For the first seven months of the year, headline inflation averaged 1.4 percent, much lower than the target of 2.0 percent to 4 percent originally projected by the National Economic and Development Authority.
During the last rate-setting meeting of the BSP, its Monetary Board decided to lower its inflation forecast for 2016 from 2.1 percent to 2 percent.
Meanwhile, NEDA has reduced its full-year expectation to an average inflation rate of 1.98 percent.