January inflation seen higher at 2.6-3.1%

Higher prices of food, oil and the so-called “sin” products likely pushed the inflation rate even higher in January to a range of 2.6-3.1 percent, according to economists polled by the Inquirer last week.

Metrobank research analyst Pauline May Ann E. Revillas said her forecast of a 2.6-percent year-on-year increase in the prices of basic goods at the start of the year was due to “mixed movements of food prices and higher gasoline prices.”

DBS Bank Ltd. economist Gundy Cahyadi shares the same forecast, while also expecting that the Bangko Sentral ng Pilipinas will likely keep key interest rates steady at the meeting on Thursday of the Monetary Board.

“While we have expected the central bank to adjust rates higher early this year, the comments from various BSP officials suggest that the central bank has little intention to do it now. Still, inflation is on the rise and GDP [gross domestic product] growth momentum is solid. No reason to keep rates at the current low levels although the central bank seems comfortable with the peso on a slightly weaker tone,” Cahyadi said.

Following the government’s announcement of the 6.8-percent GDP growth in 2016, BSP Governor Amando M. Tetangco Jr. said “the inflation outlook also remains manageable” so “there is no pressing need to deviate from the current monetary policy stance.”

Rajiv Biswas, Asia-Pacific chief economist at IHS Markit, projected headline inflation to have had increased 2.8 percent in January, “reflecting higher world oil prices after the November decision by Organization of the Petroleum Exporting Countries ministers to reduce oil production, which has pushed up retail prices of petrol and diesel.”

“Higher excise taxes for alcohol and tobacco will also contribute to higher CPI [consumer price index] inflation, although this will be mitigated by some reductions in electricity prices. Despite the recent upturn in headline CPI inflation since last August, the year-on-year increase in inflation is expected to remain within the BSP’s target range of 2-4 percent for 2017.”
“However the upturn in world oil prices, recent rises in CPI inflation and continued strong GDP growth are expected to increase BSP’s concerns about upward risks to inflation, with a policy rate hike expected later in 2017,” Biswas added.

Land Bank of the Philippines market economist Guian Angelo S. Dumalagan said consumer prices likely grew 2.9 percent last month on the back of higher oil prices and a weaker peso.

Also, “food prices likely accelerated as well because of the lingering effects of the typhoon which hit the country in December,” Dumalagan added, referring to Typhoon “Nina.”