By Elijah Joseph C. Tubayan, Reporter
THE OVERALL RISE in prices of widely used goods can be expected to creep closer to six percent this month before peaking in September, the head of the Bangko Sentral ng Pilipinas (BSP) said in a forum on Friday.
In a panel discussion during the National Press Club economic forum in Manila, BSP Governor Nestor A. Espenilla, Jr. said that, based on monetary authorities’ initial assessment, “the August inflation number may actually be higher than the July number.”
He told reporters after the forum that the BSP is “not seeing six percent” but “it might be close to the last one.”
July’s headline inflation clocked in at 5.7%, the fastest pace in at least five years, pulling the seven-month average to 4.5% against the BSP’s 2-4% target range and upgraded 4.9% forecast for full-year 2018.
Mr. Espenilla said “the peak will probably be hit in August or September before it starts coming down,” hinting that anything could happen in the next rate-setting meeting on Sept. 27.
“You don’t know the peak until you see the turn. We have to watch carefully the developments. We have to gather more information,” he replied when asked about how this latest inflation expectation could impact the BSP’s policy decision next month.
“We aren’t necessarily reacting to the now. We are reacting to the future, so we need to understand how the broader public processes the information and we have to look at what’s happening outside as well.”
The central bank fired off its third consecutive interest rate hike last week — amounting to 50 basis points in one volley — following 25 bp hikes each in May and June after nearly four years of policy stability.
In its latest policy decision, the BSP’s Monetary Board cited the need for “stronger monetary action… to rein in inflation expectations and prevent sustained supply-side price pressures from driving further second-round effects” in the wider economy.
Mr. Espenilla on Friday said Turkey’s economic woes — marked by dwindling foreign exchange reserves and escalating trade tensions with the United States — “is another new element”. While that crisis is expected to directly affect European banks that have considerable exposure to Turkey’s debt, there are signs it has begun to make investors shun emerging markets as an asset class.
“What if it escalates? It can create instability of currencies and have contagion on seemingly same economies, although we strongly contend that the Philippines has very different fundamentals from that of Turkey. So it might introduce volatility in the peso,” he explained.
He said the central bank’s response may consist “not necessarily in raising interest rates, but perhaps using tactically our reserves.”
“There are so many possibilities. If you want to worry, I can assure you we have enough reasons that we can find to worry and be sleepless about it,” Mr. Espenilla said.
“But our approach is we hope for the best and we prepare for the worst. That’s why we keep the reserves, stick to our own script of running our economy well, of being able to manage our fiscal house and to be able to manage our inflation so we are not entirely dependent on what’s happening outside,” he added.
“Mabuti nga na (It was good that) we raised 50 basis points. We didn’t know that Turkey was going to happen. So with 50 basis points, hindi masyadong mag-panic (we don’t really have to panic). We hope that the crisis will settle down soon enough.”

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