Thailand
Philippines: Inflation to hit 3% in Q1 – DBS
MANILA, Philippines – Inflation is unlikely to slip back towards two percent anytime soon and is seen to hit three percent within the first quarter of the year, DBS Bank Ltd. said.
The consumer price index kicked up to its highest in over two years after climbing to 2.7 percent in January from 2.6 percent in December as transport prices rose to two percent.
“We reckon that CPI inflation will hit three percent by the end of this quarter. Beyond that, much will depend on oil and food price trajectory. It is safe to say, however, that inflation is unlikely to slip back towards two percent anytime soon,” DBS said.
The Bangko Sentral ng Pilipinas (BSP) has set of two to four percent between 2017 and 2020.
“The current outlook suggests that we are unlikely to see inflation hitting the ceiling of that target, barring an oil price shock, until 2019. Which means the central bank is unlikely to panic over inflation risks in the near term,” DBS said.
The BSP’s Monetary Board kept benchmark interest rates unchanged during the first of its eight rate setting meetings last Thursday amid upward pressure on inflation.
Monetary authorities said the balance of risks surrounding the inflation outlook continues to be weighted toward the upside amid possible adjustments in electricity rates as well as the initial impact of the government’s broad fiscal reform program.
On the other hand, uncertainty over global growth prospects continues to pose a key downside risk to the inflation outlook.
“The Monetary Board stressed that while the global economic environment has become more challenging due to expected shifts in macroeconomic policies in advanced economies, domestic economic activity is expected to stay firm, supported by buoyant household consumption and private investment, increased fiscal spending, and ample credit and liquidity,” BSP officer-in-charge Nestor Espenilla Jr. said.
While inflation has risen due to the recent increases in food and oil prices, Espenilla added latest baseline forecasts continue to indicate that the future inflation path would remain within the BSP target range.
However, authorities raised its inflation forecast to 3.5 percent instead of 3.3 percent for this year and to 3.1 percent instead of three percent for next year due to higher oil prices, weaker peso, higher wages, and firm domestic demand.
DBS said inflation was hovering well below two percent when the BSP made the switch to the current policy regime in mid-2016 with the launch of the term deposit facility (TDF) under the interest rate corridor (IRC) framework.
“Since then, the one-month term deposit rate has gone up by almost 100 basis points without any change in the overnight policy rate,” the Singaporean bank said.
Economic managers see the country’s gross domestic product (GDP) growing between 6.5 and 7.5 percent this year after averaging 6.8 percent last year.
Source: http://www.philstar.com/business/2017/02/12/1671224/inflation-hit-3-q1-dbs