BANK economists polled by the Bangko Sentral ng Pilipinas (BSP) cut their inflation forecasts for this year and next year marginally, as global oil prices are seen to remain cheap in the near term.
The results of the BSP’s survey of private sector economists conducted last December showed a lower average annual inflation forecast of 2.5 percent for 2016, compared with a mean projection of 2.7 percent in September.
These forecasts were within the BSP’s target inflation range of 2 to 4 percent.
For 2017, the 25 respondent-economists saw the rate of increase in prices of basic goods inching up to an average of 2.7 percent; their previous forecast was higher at an average of 2.9 percent.
“The analysts attributed their lower inflation expectations mainly to lower global oil prices and lower domestic utility rates. These are likely to outweigh the upside risks brought by the El Niño phenomenon, typhoons, increased expenditure from the upcoming elections, robust consumer spending during the holiday season, weakening of the domestic currency, and possible adjustments in utility rates,” the BSP explained.
Citing the probability distribution on the forecasts provided by 20 respondents, the BSP said that “for 2016, there is a 63.9-percent chance that inflation will fall within the 2 to 4 percent target band.”
The BSP’s December 2015 Consensus Economics survey, meanwhile, showed a similar 2.5-percent mean inflation forecast for 2016, lower than the 3.2-percent projection last September.
The BSP expects inflation to “rise moderately”—although settling within the 2 to 4 percent target—in 2016 from the almost three decade-low of 1.4 percent last year, BSP Deputy Governor Diwa C. Guinigundo said in a briefing last week.
Also, BSP Governor Amando M. Tetangco said that domestic monetary policy settings remain appropriate despite emerging external risks expected to cause near-term market volatility.
“Our operating environment is now more challenging with oil prices continuing to fall and global growth prospects softening. For the Philippines, these mean more potential financial market volatility in the near term, for which we have the tools,” Tetangco said.
Global oil prices further slid last week amid expectations of a supply glut following the lifting of sanctions on oil-producing Iran.
“Right now, our forecast for inflation is still a slow move to within target over the policy horizon, indicating monetary policy stance remains appropriate for now,” Tetangco said.
The BSP’s Monetary Board kept key policy rates steady during its last meeting for 2015.