Inflation likely down anew in January – poll
Credit to Author: ANNA LEAH E. GONZALES| Date: Sun, 03 Feb 2019 16:15:25 +0000
Inflation likely continued to ease in January due to lower oil prices and reduced supply pressures, economists polled by The Manila Times said.
Projections for the month ranged from 4.3-4.9 percent with a 4.5-percent average — lower compared to the 5.1-percent consumer price growth recorded in December.
The Bangko Sentral ng Pilipinas (BSP) has also indicated that inflation likely slowed anew in January, last week issuing a 4.3-5.1 percent forecast.
Official inflation data is scheduled to be released by the Philippine Statistics Authority tomorrow, February 5.
Moody’s Analytics economist Katrina Ell, who offered the highest inflation forecast of 4.9 percent, said key interest rates were likely to be kept unchanged when the BSP’s policymaking Monetary Board meets two days later.
“We think that inflation will remain on a bumpy downtrend in 2019,” she added.
A decision to keep policy settings steady is “widely expected … not least because CPI (consumer price index) growth is well past the peak and expected to keep cooling in 2019,” Ell continued.
“We attach a 40-percent probability that the central bank will reverse some of the tightening in the first half of 2019. Flagging domestic demand has been under pressure so would be an important contributor. But given that inflation remains above the central bank’s 2 to 4 percent target range, this could be pushed out to later in 2019.”
DBS economist Masyita Crystallin, meanwhile, forecast an easing to 4.7 percent due to lower oil and rice prices.
“We think the trend is going to continue this year. Government has implemented the second tranches of fuel price hike[s] as planned because oil price stayed below $80 (based on the Mean of Platts Singapore ),” she said.
Crystallin noted that pressure from fuel prices would likely continue to hover in the background. Rice prices will also pose some risks depending on the weather.
The Bank of the Philippine Islands (BPI), ANZ Research and the University of Asia & Pacific all said inflation likely slowed to 4.5 percent last month.
BPI Vice-President and lead economist Emilio Neri Jr. said inflation decelerated as the “increase in oil prices this year is not as significant as we saw the same time last year.”
“Food prices are also rising at a more modest pace this year compared to January 2018,” he added.
UA&P economist Victor Abola also attributed an expected slowdown to lower crude oil prices, further noting that “despite the increase in excise taxes, the downtrend in inflation rate will continue throughout the year.”
ANZ Research, in a report, said lower inflation would be caused by an “easing in supply pressures.”
“The pace of decline in annual inflation will slow going forward. We expect inflation to remain near the central bank’s 4-percent upper limit over the coming months,” it said.
ING Bank Manila and HSBC Global Research both had the lowest inflation forecasts of 4.3 percent.
ING Bank senior economist Nicholas Antonio Mapa also believes that lower crude prices were a factor along with the government’s move to hike rice imports.
“Whenever inflation is driven by cost push factors (global oil prices and shortage of rice), once the supply bottlenecks are mitigated or removed, inflation tends to dissipate very quickly,” Mapa said.
“Global oil prices have come off from their peaks in 2018 … and rice imports have helped augment local production. Furthermore, the impending rice tarrification law awaiting signature of the President will also help keep rice prices, which account for 10 percent of inflation, in check,” he added.
Mapa said the slowdown would continue moving forward, albeit at a more muted pace.
“[A]s long as food items see price pressures contained, we will see inflation glide back to within target by 2Q 2019,” he added.
HSBC Global Research also attributed lower inflation to oil and rice price reductions.
”Rice prices have continued to decline, which is a positive development as this was one of the biggest contributors to high inflation in 2018. Meanwhile, the rise in domestic pump prices in January has been more moderate compared to the same month last year, despite additional excise taxes,” it noted.
Headline inflation will likely average 3.3 percent in 2019, HSBC said, lower than the 5.2 percent posted last year.
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