Inflation hits 8-mo high in January
Credit to Author: Mayvelin U. Caraballo, TMT| Date: Wed, 05 Feb 2020 17:06:17 +0000
THE country’s headline inflation accelerated to an eight-month high of 2.9 percent in January, the Philippines Statistics Authority (PSA) announced on Wednesday, supporting analysts’ consensus view that monetary authorities could resume easing policy rates as early as this month.
The figure — up from December’s 2.5 percent and the highest since May 3.2 percent — fell within the Bangko Sentral ng Pilipinas’ (BSP) 2.5 to 3.3-percent projection.
The result matched the 2.9-percent average forecast in a Manila Times poll of economists.
Core inflation, which excludes selected food and energy items, rose to 4.4 percent from 3.1 percent a month earlier and 3.3 percent in January 2019.
“The heavily-weighted food and non-alcoholic beverages index, which registered an annual increment of 2.2 percent, primarily contributed to the uptrend of inflation in January 2020,” the PSA said in a statement.
Commenting on the January figure, Bangko Sentral Governor Benjamin Diokno said it “is consistent with the BSP’s prevailing assessment that inflation is expected to gradually approach the midpoint of the target range in 2020 and 2021.”
The central bank, he added, will consider all the latest developments in the rate-setting meeting of its policy-making Monetary Board on Thursday, February 6.
Last year, monetary authorities implemented a combined 75-basis-point (bps) cut in interest rates. This brought overnight borrowing, lending and deposit rates to 4 percent, 4.50 percent, and 3.50 percent, respectively.
Citing the latest inflation data, analysts from ING Bank Manila and JP Morgan expect monetary authorities to cut interest rates by 25 bps on Thursday.
“With inflation still expected to remain within target and as global growth is likely to be hampered by the spillover effects from the recent 2019-nCoV (2019 novel coronavirus) episode, we expect the central bank to resume unwinding its previous policy tightening to bolster growth momentum and chase the 6.5 to 7.5-percent growth target,” ING senior economist Nicholas Antonio Mapa said.
For her part, JP Morgan’s Nur Raisah Rasid based her view on expectations that “the potential macroeconomic impact of the current 2019-nCov outbreak on the Philippine economy could magnify the lingering downside risk to growth emanating from the lackluster capex outlook this year.”
ANZ Research’s chief economist Sanjay Mathur and economist Mustafa Arif, meanwhile, see prospects of the headline inflation figure breaching the upper level of the BSP’s target range as remote.
“Our current call is for the central bank to cut its policy rate by 25 bps at its March meeting, although the odds for a cut at tomorrow’s meeting have increased,” they said.
Contradicting them is Nomura economist Euben Paracuelles, who sees the Bangko Sentral keeping its policy rates unchanged on Thursday.
“The further pick-up in headline inflation in January was within [the] BSP’s projected range of 2.5 to 3.3 percent, as opposed to materially surprising to the downside, which supports our call for BSP to keep policy settings stable,” he said.
Also on Wednesday, the National Economic and Development Authority (NEDA) said the government remained vigilant as upside risks had emerged from several unexpected phenomena and despite a stable inflation outlook for 2020.
“Despite the relatively stable inflation outlook, we cannot be complacent, as the balance of risks remains on the upside for 2020 due to the effects of the Taal Volcano eruption, spread of [the] African Swine Fever, and [the 2019-nCoV],” Socioeconomic Planning Secretary Ernesto Pernia said.
He also said the country had intensified its preparedness for disaster risk response, including the formulation of recovery and rehabilitation plans, like in areas affected by the January 12 eruption.
Moreover, Pernia said that at the local level, biosecurity and border control measures are being strengthened and regulation on the movement of pork products are strictly enforced around the country.
He advised everyone to be on guard against the 2019-nCoV, be aware of related developments here and abroad, and observe precautionary measures and advisories from the Department of Health and other concerned agencies.