Eco team to maintain low interest rates

    Karl Kendrick Chua, acting NEDA director (Photo from PCOO)

    Economic authorities will be able to maintain interest rates at low levels, the Department of Finance (DOF) said, given the continuing manageable inflation rate.

    The DOF in its economic bulletin released over the weekend pointed out inflation moderately increased to 2.7 percent in July, from 2.5 percent in the previous month, but well within the target range of 2 to 4 percent.

    “The 364-day treasury rate dropped to an average rate of 1.76 percent in July and 1.79 percent in the first auction in August,” the DOF said.

    “This will ease the burden on businesses adversely affected by the ongoing pandemic,” it added.

    The DOF said the upward adjustment in prices is mainly traced to non-food items, in particular, transportation.

    “Average price of transportation services surged by 6.3 percent. Non-food items contributed 1.2 percentage point to the July price uptick, up from its 0.9 percentage point contribution to the June inflation,” the DOF said.

    “Transportation cost increase merely reflects world prices of petroleum products. Dubai crude petroleum prices rose from $31.56 (per barrel) in May to $40.14 in June and $43.278 in July, a cumulative increase of 37.1 percent over three months,” it added.

    The agency said the easing in food inflation helped cushion the effect of the increase in non-food prices.

    In July, average food prices increased by 2.4 percent, a slower pace than the 2.7 percent price increase in the preceding month.

    The National Economic and Development Authority previously said national and local governments need to strengthen risk management systems to ensure an unhampered and sufficient supply and delivery of essential commodities that will support a stable inflation for the country.

    “Although we expect that the overall consumer prices will remain benign until 2021, we recognize that the upside risks to the inflation outlook still remain,” Karl Kendrick Chua, acting socioeconomic planning secretary, said in an earlier statement.

    “We need to remain vigilant and ensure that strategies are well-placed to ensure stable supply and delivery of essential commodities in all parts of the country,” he added.