‘August inflation eased to 2% on lower prices’
Credit to Author: ANNA LEAH E. GONZALES| Date: Wed, 28 Aug 2019 17:42:47 +0000
INFLATION likely eased further to 2 percent in August from 2.4 percent the month before on the back of reduced prices of rice, fuel and electricity, according to Union Bank of the Philippines (UnionBank).
In a report released on Wednesday, UnionBank chief economist Ruben Carlo Asuncion said consumer price growth this month “is expected to cool further, because of [the] slower annual increases in rice and other food items.”
“Lower fuel prices and electricity costs may have also contributed to the slowdown. Weather-related impact on prices may have been muted, though,” he added.
The economist’s projection is lower than the below-2 percent forecast of First Metro Investment Corp. and the University of Asia and the Pacific in the July edition of its
joint Market Call report, released earlier this month. They also pointed to reduced food prices as contributors to the inflation downtrend.
According to Asuncion, the decline in rice prices could be attributed to the Rice Tariffication Law, formally known as Republic Act 11203.
“As rice prices [have been noted to drop] in the last three months starting May, this negative inflation has been traced to” that law, which was “signed last February,” he said.
As inflation eases, Asuncion said the central bank would have enough room to trim policy rates.
“UnionBank’s Economic Research Unit (ERU) sees this benign inflation trend as a huge window for the Bangko Sentral ng Pilipinas (BSP) to ease monetary policy further,” he said, adding that the unit expected the central bank to further cut rates by 25 basis points (bps) on September 26, the day the central bank’s Monetary Board will hold its next meeting.
The economist’s statement comes a day after BSP Governor Benjamin Diokno told the Economic Journalists Association of the Philippines Economic Forum in Manila that a 25-bps-cut in interest rates was still on the table.
“We will cut another 25 bps before the end of the year and then we will review, as we remain data-dependent,” he said.
The possible reduction is on top of the combined 50-bps cut the central bank implemented in May and August that brought overnight borrowing, lending and deposit rates to 4.25 percent, 4.75 percent and 3.75 percent, respectively.
WITH A REPORT FROM MAYVELIN U. CARABALLO