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Philippines: Inflation seen to cross 7% in fourth quarter of 2018
MANILA, Philippines — ANZ Research expects inflation to hit seven percent this quarter as the Bangko Sentral ng Pilipinas (BSP) believes the supply shocks from Typhoon Ompong are likely to persist over the next few months.
“We expect headline inflation to cross seven percent this fourth quarter,” ANZ Research economist for ASEAN and India Shashank Mendirata said.
Mendirata said price pressures in the economy are broadening and inflation expectations are elevated, while domestic demand remained resilient even as past tightening works its way through the economy.
“The continued upside risks to inflation, especially the impact of the recent typhoon is likely to push up inflation,” Mendirata said.
The BSP’s Department of Economic Research (DER) said inflation ranged from 6.3 to 7.1 percent and likely settled at 6.8 percent due to higher domestic petroleum prices, higher prices of rice and other agricultural commodities due to Ompong, and the further weakening of the peso against the dollar.
The last time inflation touched seven percent was in April 2009 at 2.7 percent.
The consumer price index averaged 4.8 percent in the first eight months, exceeding the BSP’s two to four percent target. Inflation leapt to a fresh nine-year high of 6.4 percent in August from 5.7 percent in July.
Based on its latest assessment, the BSP raised its inflation forecasts to 5.2 instead of 4.9 percent this year and to 4.3 percent next year.
As part of its aggressive anti-inflation measures, the BSP has raised interest rates by a total of 150 basis points so far this year to keep inflationary expectations well anchored.
It lifted interest rates by 25 basis points for the first time in more than three years on May 10 followed by another 25 basis points on June 20, 50 basis points – the biggest in 10 years – last Aug. 9, and another 50 basis points last Sept. 27.
“Accordingly, we continue to expect the BSP to raise its key policy rate by another 25 basis points to 4.75 percent in December. This will take the cumulative rate hikes in the current cycle to 175 basis points,” Mendirata said.
Monetary authorities believed a tighter monetary policy stance would help steer inflation toward a target-consistent path over the medium term by reducing further risks to the inflation outlook, including those emanating from exchange rate volatility given the continued uncertainty in the external environment amid geopolitical tensions and the normalization of monetary policy in advanced economies particularly the US.
Source: https://www.philstar.com/business/2018/10/03/1856692/inflation-seen-cross-7-fourth-quarter-2018#8WsWkPEwT3ffrXoa.99