Economists project Nov. inflation easing to 3.2%

Inflation likely eased in November after peaking to a three-year high in October and is expected to moderate in the coming year, according to most economists polled by the Inquirer last week.

In a report titled “On the way down,” London-based economic research firm Capital Economics said it expected the rate of increase in prices of basic goods at 3.2 percent last month, lower than October’s 3.5 percent. The government will release November inflation data on Tuesday.

“Inflation has rebounded in the Philippines since July. Alongside a strong economy and rapid credit growth, this has led many analysts to forecast rate hikes in 2018. However, we think inflation is likely to moderate next year and that this will give the central bank (Bangko Sentral ng Pilipinas) the room it needs to keep policy loose,” Capital Economics said.

“The rebound in consumer prices in recent months has mainly been driven by an increase in fuel and electricity price inflation… Our forecast is global oil prices will ease the next year, which suggests that fuel price inflation will also drop. Accordingly, headline inflation should moderate and settle close to the center of the BSP’s target band of 2-4 percent over the coming months,” according to Capital Economics.

Expectations of inflation further easing “should reassure the central bank that fears of overheating are overblown and that its monetary policy stance remains appropriate,” Capital Economics said.

Among economists, Banco De Oro Unibank Inc. chief market strategist Jonathan L. Ravelas and Land Bank of the Philippines market economist Guian Angelo S. Dumalagan had the lowest November inflation forecast of 3.1 percent.

Dumalagan mainly attributed lower inflation expectations to “the unexpected appreciation of the peso and a tamer increase in food prices.”

“The peso strengthened [in November], tempering the rise in the costs of imported products, due to the Philippines’ better-than-expected growth in the third quarter of 2017, concerns about weak US inflation, and uncertainty regarding the Trump administration’s tax bill. Meanwhile, food prices potentially grew at a slower pace amid generally better weather conditions in the country last month,” Dumalagan explained.

Similar to Standard Chartered Bank, University of Asia and the Pacific economics professor Victor A. Abola projected an inflation rate of 3.2 percent “due to stable food prices, which should offset the uptick in Meralco and fuel prices.”

ANZ Research economist for South and Southeast Asia Eugenia F. Victorino’s forecast was also 3.2 percent. “Consumer prices likely rose 0.4 percent month-on-month. Global fuel prices have been rising, pushing local pump prices higher. Meanwhile, electricity prices climbed, likely pushing up the utilities component over the month,” Victorino said.

For ING Bank Manila senior economist Joey Cuyegkeng, consumer prices rose 3.5 percent year-on-year in November, same as the previous month’s rate, on the back of “energy price pressures and some food components of the [consumer price] index” even as “the peso’s weakness, though moderated year-on-year, still seemed to have a lingering impact on prices.”

DBS Bank Ltd. economist Gundy Cahyadi’s forecast was also 3.5 percent, while Nomura economist Euben Paracuelles’ projection was a higher 3.6 percent.