Inflation seen within target range

 (The Philippine Star) 

MANILA, Philippines – Inflation is expected to remain within the target range for 2015 and 2016 despite the higher train fares in Metro Manila and the increase in water rates, the Bangko Sentral ng Pilipinas said.

“Despite the approved upward adjustments in LRT (Light Rail Transit) and MRT (Metro Rail Transit) fares as well as in water rates in Metro Manila, the BSP expects inflation to remain within the target range of … (two to four percent) in 2015 and 2016,” BSP Governor Amando M. Tetangco Jr. told reporters.

The long-delayed fare hike on the LRT lines 1 and 2, and the MRT took effect yesterday. The government has approved an P11 base fare and an additional P1 for every kilometer traveled, increasing the fare by an average of 23 percent for the LRT1, 30 percent for the LRT2, and by 58 percent for the MRT.

“The BSP’s latest baseline inflation forecasts already incorporate an assumption of an LRT/MRT fare increase beginning January 2015,” Tetangco said.

“The estimated impact on average inflation in 2015 of the fare adjustment in interurban railway transport system is 0.11 percentage point,” he continued.

At the same time, Manila Water Co. Inc., which provides water services for the east zone of Metro Manila, announced a P0.36-per-cubic-meter increase on its rates set to take effect this month. West zone concessionaire Maynilad Water Services Inc., earlier also announced rate adjustments expected to take effect early this year.

“The approved adjustments in water rates in Metro Manila are likely to be marginal given the magnitude of the approved increases. Staff estimates point to an incremental increase in 2015 average inflation of 0.01 percentage point due to the water rate increase,” Tetangco said.

Inflation last year peaked at 4.9 percent in July and in August on tight supply conditions following the deadly typhoon Yolanda that hit the country in late 2013 and the congestion in key ports in Metro Manila. The rate, however, started to ease in September until it settled at 3.7 percent in November on lower cost of food and rollbacks in pump prices.

Latest government data showed the rate has averaged 4.3 percent in the first 11 months of 2014 well within the BSP’s three to five percent target range. December inflation data will be released tomorrow.

“The BSP’s assessment indicates that evolving price conditions point to a manageable inflation environment,” Tetangco said.

The BSP expects inflation to average three percent this year and 2.6 percent in 2016. These are both within the two to four percent goals for both years.