Inflation seen muted at 1.8% this year

Economists expect inflation this year to stay below the government’s 2-4 percent target range as the increase in prices of basic goods is seen subdued in the remaining months.

In a report, the Bangko Sentral ng Pilipinas (BSP) said a poll among 25 private sector economists last month showed a mean inflation forecast of 1.8 percent for 2016, unchanged from the projection churned out in a similar poll in June.

“The average annual inflation forecast for 2017 also stayed at 2.7 percent. Meanwhile, the mean inflation forecast for 2018 went down marginally to 2.8 percent from 2.9 percent in the previous quarter,” the BSP said.

Economists cited “persistently low global oil prices, sub-par global economic growth, and stable food price conditions” as reasons for expectations of sustained below-target inflation rate this year.

“These were seen to outweigh the upside risks brought by a possible rebound in oil prices, strong domestic demand, possible power rate adjustments, a weaker peso, and the impact of La Niña in the latter part of 2016 until the first quarter of 2017,” according to the BSP.

Last year, inflation averaged 1.4 percent, below the similar 2-4 percent government target.

But in September, inflation rose at its fastest pace in 18 months, as prices of food and nonfood items picked up ahead of the holiday season.

The 2.3-percent headline inflation posted last month was the highest rate since March 2015’s 2.4 percent, bringing the end-September average to 1.6 percent.

As the rate was faster than the previous month’s 1.8 percent and a year ago’s record-low of 0.4 percent, BSP Governor Amando M. Tetangco Jr. had said September’s outturn was “consistent with our expectation that inflation will slowly inch up toward the national government target range over the policy horizon.”

The BSP slightly cut its forecast to 1.7 percent from 1.8 percent previously due to expectations of manageable inflation in the near term.