Economists: Expect inflation to have cooled in November

As food and oil prices declined, inflation likely eased in November, in what economists described as an about-turn from the nine-year high posted during the two previous months.

Finance Undersecretary and chief economist Gil S. Beltran told reporters last week he expected year-on-year inflation last month to have slowed to 6.3 percent, as the month-on-month increase in consumer prices further declined to 0.07 percent from 0.3 percent in October.

The government will release the November inflation report on Wednesday, Dec. 5.

Headline inflation hit 6.7 percent in September and also in October as food supply pressures aggravated further by higher global oil prices jacked up the average rate of increase in prices of basic commodities.

As of end-October, the inflation rate averaged 5.1 percent, above the government’s target range of 2-4 percent.

International crude prices have fallen of late while the government addressed food supply constraints through administrative orders issued by President Duterte, which eased importation.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan projected inflation last month to have risen 6.6 percent, “helped by the decline in fuel prices, the recent appreciation of the peso, and the deceleration in the price of rice.”

“Other food items likewise showed weaker price increases during the month on account of the nonmonetary policy measures implemented by the government. Rice tariffication and the suspension of further excise taxes on fuel are expected to reduce inflation down to 2-4 percent by the second semester of 2019. Falling yet still elevated domestic inflation, along with widespread views of more US rate hikes ahead, could prompt more hawkish moves from the Bangko Sentral ng Pilipinas (BSP) until next year,” Dumalagan said.

The BSP hiked interest rates by a total of 175 basis points so far this year. The key policy rate currently stands at 4.75 percent.

Moody’s Analytics economist Katrina Ell said inflation likely “cooled” to 6.5 percent year-on-year last month, with “lower global oil prices [to] help inflation cool heading into 2019.”

For Capital Economics Asia economist Alex Holmes, “inflation fell back for the first time this year, to 6.4 percent year-on-year, driven by falling food and fuel prices.”

DBS Bank Ltd. economist Masyita Crystallin’s forecast is at 6.3 percent “as rice price and most volatile food prices eased.”

University of Asia and the Pacific economics professor Victor A. Abola, Nomura economist Euben Paracuelles and Pauline May Ann E. Revillas of Metropolitan Bank and Trust Co.’s research department projected 6.2 percent. Revillas said the “inflation momentum looks to have decelerated.”

“The biggest fall will be in transportation with the 20-plus percent fall in crude oil prices,” Abola, for his part, explained.

Bank of the Philippine Islands vice president and chief economist Emilio S. Neri Jr. said inflation likely rose 6.1 percent in November, with “the global oil price collapse from mid-October through mid-November was the key trigger to the sharp drop in November CPI (consumer price index).”

“Falling global oil prices also underpinned the Philippine peso’s rebound against the US dollar in November, taking out some of the steam from imported inflation. Supply side issues in food are also being gradually resolved, which combined with falling petroleum prices, far outweigh the upward pressures exerted by the wage, transport fare and electricity prices hikes during the month,” Neri added.

Rizal Commercial Banking Corp.’s Michael L. Ricafort pegged his forecast at 6 percent, which he attributed to the same factors cited by other economists.

Still, Ricafort said other factors came in, meddling in the slowdown. “Higher transport fares effective Nov. 2 and higher minimum wages effective Nov. 22, both of which could mitigate any reduction in overall inflation.”

“Higher prices of other food items before Christmas, though partly expected, could also offset/temper any further reduction in overall inflation,” he said.