Inflation seen hitting new low

INFLATION likely remained subdued in August as fuel and food prices stayed low, barely moving from year-ago levels, private sector forecasts showed. AFP FILE PHOTO

INFLATION likely remained subdued in August as fuel and food prices stayed low, barely moving from year-ago levels, private sector forecasts showed.

This is in line with the government’s own forecast that showed that inflation might have gone down further to a new record low in August, also partly due to base effects from last year’s peaks.

As a result, the Bangko Sentral ng Pilipinas (BSP) is expected to keep its key interest rates steady for the time being.

“The BSP seems to be satisfied with its current policy stance. It appears to be hesitant to ease policy as it could trigger severe exchange market pressure should,” BPI lead economist Emilio Neri Jr. said in an interview.

Neri said he was expecting inflation for August to average 0.5 percent, slowing from the previous record low of 0.8 percent that was recorded in July.

“We think inflation has bottomed in August,” Neri said.

In July and August of 2014, inflation peaked at 4.9 percent. Due to base effects, inflation is expected to reach its lowest point for the year in July and August.

Neri said inflation might start rising above 1 percent starting September. However, for all of this year, inflation would still likely average below the BSP’s target range of 2 to 4 percent.

Last week, Bangko Sentral Governor Amando M. Tetangco Jr. said inflation would average between 0.2 to 1 percent in August.

The BSP’s main goal is to keep consumer prices stable to protect the peso’s purchasing power.

Inflation data for August will be released this week.

In a separate report, Singapore’s DBS bank said it was expecting inflation reaching 1 percent in August, citing strong domestic demand conditions.

“With GDP growth still looking fairly strong, the BSP is not under any kind of pressure to tweak its policy right now,” DBS economist Gundy Cahyadi said.

“However, it is likely that the central bank would be tolerant of some weakening of the peso going forward, particularly given how the peso has moved in the past 18 months or so,” Cahyadi said.