Inflation to sustain slowdown – analysts
Credit to Author: MAYVELIN U. CARABALLO, TMT| Date: Sun, 30 Dec 2018 16:13:32 +0000
Lower food and fuel prices likely kept inflation on an easing path in December, economists polled by The Manila Times said.
Their average forecast of 5.7 percent is lower than the 6.0 recorded in November, when consumer price growth slowed—after accelerating since the start of 2018—from a nine-year high of 6.7 percent in September and October.
The Bangko Sentral ng Pilipinas (BSP) also expects the easing to be sustained, last week issuing a 5.2-6.0 percent forecast.
Official inflation data is scheduled to be released this Friday, January 4.
Philstocks.ph senior research analyst Justino Calaycay Jr. offered a forecast range of 5.9-6.2 percent, saying “the expected surge in holiday-induced consumption, particularly on retail demand, was tempered by an easing in fuel prices.”
Oil companies implemented pump price cuts four times this month, extending a run of rollbacks, and regulators subsequently decided to cut jeepney fares that were earlier hiked due to soaring fuel prices.
Ateneo de Manila University economist Alvin Ang, meanwhile, said inflation likely slowed to 5.8 percent in December as “food prices have remained stable though some upticks are observed due to seasonal activities.”
“Other basket movers are household furnishings, restaurant and communication all due to the season,” he added.
Union Bank of the Philippines chief economist Ruben Carlo Asuncion, for his part, believes that inflation could have settled at 5.7 percent but noted that “this is still elevated because of Christmas demand and consumption.”
Rising inflation, which breached the 2.0-4.0 percent target in March and hit a nine-year high of 6.7 percent in September-October, prompted the BSP’s policymaking Monetary Board to raise key interest rates for five consecutive times beginning May.
November’s inflation easing prompted a pause although some observers expect rate hikes to resume next year as fuel taxes will be raised starting January.
Asuncion, who said the MB could continue holding off from hiking rates, added that a 25-basis point “proactive move” was also likely given the fuel tax hike.
“I say probably because this is on the back of the continuous decline of global oil prices,” he said.
Taxes on diesel are scheduled to go up to P4.50 per liter at the start of 2019 from P2.50/liter, while taxes on gasoline will rise to P9/liter from P7/liter under the Tax Reform for Acceleration and Inclusion law or Train.
Moody’s Analytics economist Katrina Ell, lastly, had the lowest inflation forecast of 5.5 percent.
“If we assume that emerging markets don’t come under the same pressure in 2019 that they did in 2018, then it looks like the BSP’s tightening cycle has ended, following the aggressive action in 2018,” Ell said.
Interest rate cuts could even come into the picture, she continued, if domestic demand appears to be under pressure.
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