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The domestic inflation rate is continuing to increase due to expanding price pressures, which are partly attributable to increased oil prices, but the Bangko Sentral ng Pilipinas (BSP) has stated that it is prepared to take the necessary policy measures to preserve price stability.

This comes as the Philippine Statistics Authority (PSA) revealed on Friday that the domestic rate of price hikes increased further in July to 6.4 percent, the highest rate since October 2018 and the fourth consecutive month it violated the government’s intended range of 2-4 percent.

Inflation throughout the year’s first seven months averaged 4.7 percent.

In July 2021, inflation was 3.7 percent, compared to 6.1 percent in June of last year.

The BSP stated in a statement that the inflation reading from last month is consistent with its view of heightened pricing pressures over the short term on firmer evidence of second-round impacts and is within its 5.6 to 6.4 percent target range for July.

According to the report, rising inflation expectations and emerging second-round effects like increases in minimum salaries and transportation costs, which are mostly caused by the elevated global oil and commodity prices, broaden pricing pressures.

According to the BSP, concerns include the impact of the Russian-Ukrainian conflict on non-oil commodity prices on the global market and the probable second-round effects of high oil prices on the cost of products and services.

Due to shortfalls in the supply of certain essential food commodities, domestic food prices also represent upside risks, it was underlined.

According to the BSP, “the ongoing uncertainty from the Covid-19 (coronavirus disease 2019) pandemic continues to constitute a downside risk to the outlook” and “a slower-than-expected global recovery due to tighter global monetary policy conditions.”

As a result, the BSP is able to fulfill its core mandate of price stability by promising to “take all necessary policy action to bring inflation toward a target-consistent path over the medium term.”

The central bank’s main rates have increased by 125 basis points overall since last May, according to the report, and this “could assist temper inflation expectations.”

In addition, it added that it “reiterates its support for the closely coordinated efforts of other government agencies in conducting non-monetary interventions to alleviate the impact of persistent supply-side variables on inflation.”

In addition, the statement said that during its monetary policy meeting on August 18, 2022, the Monetary Board (MB), which sets policy for the central bank, “would evaluate its assessment of the inflation forecast along with the most recent GDP (gross domestic product) outturn.”

The BSP expects average inflation to be 5% this year, which is higher than the goal range. This is partly because of rising prices for both oil and non-oil commodities on global markets and supply shortages for a number of food goods domestically.

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