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Philippines: Inflation steady at 4% in August
MANILA, Philippines — The rate of increase in consumer prices was likely unchanged in August as oil and food prices managed to ease further last month, an international think tank said.
In its weekly brief, London-based Capital Economics said it expects inflation in August to remain at four percent, the same rate in July when it slid back to within the government target band for the first time this year.
However, the Bangko Sentral ng Pilipinas said inflation last month could settle within the 4.1 to 4.9 percent range. Market consensus is at 4.3 percent.
“In August, petrol and rice price inflation is likely to have fallen further due to improving base effects. Meat prices should have also eased a bit as imports reduced supply shortages,” economist Alex Holmes said.
“But, these factors are likely to have been offset by a jump in the price of liquid petroleum gas, as well as a price hike by the country’s largest electricity company, Meralco (Manila Electric Co.),” he said.
As inflation holds steady and is still within the BSP’s target, Holmes said this should persuade the central bank to loosen policy during its regular meeting later this month.
The think tank has been insisting that BSP will cut rates by a further 50 basis points in the second half of the year, with the first one in a few weeks time.
It has been 10 months since BSP adjusted rates following the surprise 25 bps rate cut in November.
“We don’t think high inflation alters the policy outlook for the BSP. For one thing, the headline rate should resume its fall later in the year as the low base in global oil prices slips further out of the annual comparison,” Holmes said.
He added that there is a more pressing need to provide support to the economy as virus cases continue to surge.
“BSP Governor (Benjamin) Diokno noted that the bank has ample leeway to support the economic recovery, with conventional policy instruments far from being fully utilized,” Holmes said.
Market consensus expects the central bank to keep rates unchanged for the rest of the year.
Source: https://www.philstar.com/business/2021/09/06/2125086/inflation-steady-4-august