Inflation in January slowing to 0.8-1.6%, poll indicates

INFLATION likely slowed in January from the 2.4 percent posted a year ago, settling within the Bangko Sentral ng Pilipinas’ (BSP) projected range of 0.8-1.6 percent, an Inquirer poll among economists last week showed.

ING Bank Manila senior economist Joey Cuyegkeng set the lowest forecast of 1.1 percent, saying that the “lower retail prices of oil products, power rates, vegetable prices and jeepney fares should offset the still elevated prices of meat, alcohol and tobacco products.”

But Cuyegkeng said the moderate rate of increases in the prices of basic goods in January was expected to be “temporary, and that the overall trend is still higher.”

Ateneo de Manila University economics professor Alvin P. Ang’s January inflation forecast is 1.2 percent.

For Metrobank Research, inflation at the start of 2016 was expected at 1.4 percent, “given the broad increase in food prices, although this is mitigated by still soft oil prices,” research analyst Pauline May Ann E. Revillas said.

French corporate and investment bank Natixis’ Trinh D. Nguyen said his company’s forecast was 1.4 percent.

“Inflation is rather contained and slightly below the central bank’s 2-4 percent target [for 2016],” Nguyen said.

DBS Bank Ltd economist Gundy Cahyadi’s forecast is 1.5 percent, as “headline inflation will be distorted by the slump in oil prices.”

“What seems clear to us is that inflation will be well within the target range this year,” he added.

For Standard Chartered Bank economist for Asia Jeff Ng, inflation rose 1.6 percent year-on-year last month.

Bangko Sentral Governor Amando M. Tetangco Jr. told reporters in a text message last week that the downward pressures in January inflation would come from “the decline in power rates, lower domestic oil prices, and downward adjustment in the minimum jeepney fare.”

Transportation regulators implemented a 50-centavo cut in minimum jeepney fare to P7 last week.

Tetangco said the lower oil, power and transport costs “could offset the slight uptick in rice prices as well as the (impact of the) annual sin tax adjustments.”

Under the Sin Tax Reform Law, the excise tax on cigarette packs priced P11.50 or less climbed to P25 starting Jan. 1 this year from P21 a year ago, while brands priced higher than P11.50 per pack saw their tax higher by P1 to P29, bringing retail prices higher. For fermented liquor, those with net retail price per liter of P50.60 or less saw their excise tax increase to P21 from P19 in 2015, while the tax on those priced above P50.60 rose by P1 to P23.

Inflation in December rose to 1.5 percent from 1.1 percent in November due to price increases brought about by the upbeat demand during the holiday celebrations.

In an open letter to President Aquino, Tetangco said “the latest baseline forecasts of the BSP indicate that inflation is likely to rise gradually and is expected to be within target [of 2-4 percent] in 2016 and 2017.”

“Inflation gained some momentum near the end of 2015, as the impact of recent typhoons led to increases in the prices of key food items, notably vegetables, fruits, meat, and fish. Inflation is also seen to be higher in 2016-2017 given the low 2015 base,” Tetangco said.

Also, Tetangco said “improved demand from recovering economies could spark a rally in international oil prices.”