PH inflation seen easing on lower oil prices

Lower oil prices and stable food costs likely pushed inflation down further in November, giving monetary authorities space to hold rates at their current lows to give the economy room to grow.

Banks polled by the Inquirer were unanimous in saying that prices likely moderated last month.

Data for November inflation will be released at the end of the week.

The deceleration in inflation will come as a result of “slower price growth across all food groups except vegetables, and a deeper contraction in oil prices,” Metropolitan Bank & Trust Co. said.

In October, inflation eased to 4.3 percent after peaking in July and August at 4.9 percent. The moderation in consumer price raised hopes that the Bangko Sentral ng Pilipinas (BSP) would hit its inflation target of 3 to 5 percent for the fifth year in a row.

For the month of November, the BSP said consumer prices likely rose between 3.5 and 4.3 percent.

The average for the year will likely stand at 4.4 percent, central bank officials earlier said.

Eight banks polled by the Inquirer said inflation for November would be lower than the previous month, with the median forecast standing at 4 percent.

With price pressure moderating, analysts said the BSP would have the luxury to keep interest rates low, which should help the economy return to higher growth.

The BSP’s main goal is to keep prices stable to protect the peso’s purchasing power.

“Coupled with the surprisingly low third quarter gross domestic product (GDP) growth number, expect no change in the upcoming BSP rate meeting,” DBS analyst Gundy Cahyadi said in a note to clients.

BPI research analyst Nicholas Mapa said the BSP did not seem concerned about the economy’s weaker-than-expected performance in July to September.

“I don’t think they’re looking at it as weak. If you look at the medium trend, we were averaging 5.5 percent so we’re still above that,” Mapa said in an interview, “We’ve just gotten used to 7 percent.”

Despite the consensus on inflation, banks remained split as to when the BSP would again increase rates.

Banks agree, however, that rates would be left untouched at the next policy meeting on Dec. 11, and most see the next adjustment coming in the second quarter next year.

JP Morgan in a note to clients said it expected interest rates to stay where they are for all of 2015.