By FIL C. SIONIL
Yields of government IOUs jumped by an average of 50 basis points yesterday in reaction to the surge in inflation rate to an average of 6.0 percent for the month of July, the highest in nearly three years.
The Bangko Sentral ng Pilipinas (BSP), on the other hand, tried to downplay the uptick in the price of government bonds trading in the secondary market arising from inflation acceleration, saying "the ongoing pressures on consumer prices" are temporary and will taper off later on.
BSP Officer-in-Charge Armando Suratos explained there is no need for the regulators to step-in to quash the supply-driven inflation uptick through monetary tightening.
"The Monetary authorities believe that the currency monetary stance remains appropriate to the cost-push character of the on-going inflationary process," he pointed out.
Suratos also stressed that the creeping increase in CPI is "consistent with the BSP’s projected path for headline inflation" since continuing pattern of price increases remains generally a supply-side phenomenon."
Still, Suratos assured that the authorities will continue to be vigilant in monitoring developments in price conditions and inflation expectations because of its effect on the BSP’s forecast for inflation over the next two years.
Should this happen, he hinted the authorities could "formulate appropriate measures, response to potential second-round effects from cost-push factors that may emerge over the near term."
