Risks to inflation this and next year have risen, prompting monetary officials to revise upwards inflation forecasts for the two-year period to 4.4 percent and 3.5 percent, respectively, a government press release said.

The figures were previously at 3.6 percent for 2011 and three percent for 2012.

Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo yesterday said the increase was made after the introduction of new information that were not presented during the December 29, 2010 meeting of central bank’s policy-making Monetary Board.

In the previous policy meeting of the MB, the jeepney fare hike assumption is only P0.50 but was changed to P1 today after the minimum jeepney fare was reversed this month to P8.

Guinigundo said the proposed P5 and P6 hike in the fare on ordinary and air conditioned buses, to be implemented this month, was also included just today as among the upside inflation risks.

He said the 11 percent increase in water prices, to be implemented next month, was also not included during the policy meeting of the Board in December last year.

The increase in wheat prices of four percent in July this year and 6.95 percent in October were also not included in the earlier assumptions of the MB as among the upside risks to inflation.

The MB also included, during its meeting today, the price movements on sugar, Guinigundo said.

Crude oil price assumption for this year was changed to 96.67 per barrel and 97.38 per barrel for 2012 from 88.50 and 88.27 for 2011 and 2012, respectively.

“Additional information were considered by the Monetary Board and this will explain the higher forecast for both 2011 and 2012,” Guinigundo said.

Guinigundo, however, stressed that amid the increase in the inflation forecast they still remain confident that inflation will remain within the three to five percent target until next year.

He said core inflation remains manageable and inflation expectations are broadly well-anchored.

He, on the other hand, stressed that monetary officials “need to be preemptive” vis-à-vis the inflation and policy rates, adding that “we are not going to wait until we breach the inflation target.”

“Right now the data would indicate that there still some flexibility of keeping policy rates steady,” he added.

The MB kept for the 14th time today central bank’s record-low policy rates of four percent for the overnight borrowing rate and six percent for the overnight lending rate, both of which were steady since July 2009, the press release said.*AFP

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