Pickup in Feb inflation seen, but still within target

AFP file photo

MANILA, Philippines  — Inflation likely quickened in February on the back of more expensive food items and utility costs, although the price growth last month likely stayed within target.

An Inquirer poll of six economists yielded a mean inflation forecast of 3.1 percent which, if realized, would be faster than the 2.8 percent recorded in January.

But the median projection settled within the forecast of Bangko Sentral ng Pilipinas (BSP) that pegged last month’s inflation at between 2.8 and 3.6 percent. Overall, both forecasts from the Inquirer poll and the BSP showed inflation staying within the state’s 2 to 4 percent target range for the third straight month.

“Food prices and energy costs have remained high,” said Leonardo Lanzona, economist at Ateneo de Manila University.

READ:  2024 inflation seen slowing to 2-4%

“Despite the BSP interest policy, the government has hardly made any dent on the supply side, which continues to impose an upward pressure on prices. The financial consolidation issues had limited any form of government program that can increase productivity,” added Lanzona, who projected February inflation at 3.1 percent.

For Ma. Ella Oplas, economist at De La Salle University, there were indications of brisker economic activity in February that likely fueled demand for key consumer items.

“We saw an increase (although minimal) in agriculture production, which means people in the sector earned [and] therefore can be translated again [to an] increase in demand,” Oplas said. She projected February inflation to have settled at between 3 and 3.5 percent.

Prudent move

At its meeting last month, the Monetary Board left its benchmark rate unchanged at 6.5 percent, the highest in more than 16 years, in what the BSP called a “prudent” move amid persistent risks to the inflation outlook.

READ: In a ‘prudent’ move, BSP keeps key rate at 6.5%

What’s worrying the BSP at the moment are higher transport charges and electricity rates, as well as costlier oil and domestic food prices. The central bank is also wary of the additional impact on food prices of a strong El Niño episode.

For this year, the BSP said inflation would ease in the first quarter before potentially soaring above the target anew in the second quarter as favorable base effects fade. From there, price growth is projected to return to the target band in the third quarter to end the year at an average of 3.6 percent, a tad lower than the BSP’s previous baseline forecast of 3.7 percent.

Governor Eli Remolona Jr. had said a rate cut was possible this year as inflation showed signs of softening. But analysts said the BSP might be waiting for a more convincing slowdown in price growth before making any easing moves. INQ