INFLATION may fall below the low end of official forecasts for a few months, giving monetary authorities space to ease policy settings to support economic growth, American financial giant JP Morgan said.
The bank said yesterday that the country’s lower im port bill—a result of cheaper fuel from abroad—gave the economy a buffer to absorb capital flight later this year if investor sentiment toward emerging markets turned sour.
This followed the Bangko Sentral ng Pilipinas’ (BSP) decision to keep interest rates steady at near record lows this week due to low inflation.
“Inflation could drift to the lower bound of the inflation target range,” JP Morgan chief economist for Southeast Asia Sin Ben Ong said in a note to investors.
He said domestic activity is expected to remain firm throughout the year. “This should keep the central bank on hold through the first half of 2015,” he said.
Inflation in January slowed to 2.4 percent—the slowest since the third quarter of 2013—from 2.7 percent in December. For all of this year, the BSP wants to keep inflation within a range of 2 to 4 percent.