Dec inflation likely stayed at 3.3% – poll


Inflation likely remained unchanged in December, analysts polled by The Manila Times said, giving monetary authorities continued leeway not to adjust key interest rates.

Forecasts for the month ranged from 3.2 percent to 3.5 percent with a 3.3 percent average, the same rate posted in November. Analysts also gave a 3.2 percent consensus estimate for full-year inflation.

Official December and 2017 data will be released today by the Philippine Statistics Authority.

All seven analysts polled said the year-ago rate of 2.6 percent would have been surpassed given consistently higher consumer price growth since the start of 2017.

The Bangko Sentral ng Pilipinas (BSP) has said that December inflation could fall within 2.9-3.6 percent. Monetary authorities noted that their estimates—2017 inflation is expected to average 3.2 percent—remain within the 2.0-4.0 percent target.

The Department of Finance also said that headline inflation could have eased to 3.2 percent in December given stable food prices and lower power costs

An analyst from Metropolitan Bank and Trust Co.’s (Metrobank) research unit offered the highest forecast for December.

“December year-on-year inflation forecast of 3.5 percent and 3.2 percent for the full-year 2017. Higher inflation expected in 2018 but well within the BSP range, with potential rate hikes this year,” Metrobank Research head Marc Bautista said.

University of Asia and the Pacific economist Victor Abola forecast 3.4 percent inflation for the month as an “uptick in food prices during Christmas season should be offset by lower electricity charges and relatively stable fuel prices.”

Analysts from IHS Markit, ANZ Research, and DBS, meanwhile, believe inflation was unchanged at 3.3 percent.

“The headline CPI (consumer price index) inflation rate in December is estimated to rise by 3.3 percent year-on-year, with the month-on-month increase in December reflecting the impact of higher world oil prices in the second half of December,” IHS Markit chief economist Rajiv Biswas said.

With both headline and core inflation remaining within the Bangko Sentral’s target range, policy rates are expected to kept on hold during the Monetary Board’s first meeting for the year, he added, albeit there is a tightening bias due to upside inflation risks.

“For calendar 2017, the headline CPI is estimated to rise by 3.2 percent year-on-year,” he said.

Biswas said the outlook for 2018 was for an increase in headline inflation to the top of the 2-4% target by midyear due to the impact of tax increases that took effect January 1.

“However since the increases in indirect taxes will have a temporary impact on the headline inflation rate and drop out of the CPI calculation after 12 months, the BSP is expected to look through this temporary factor when assessing the inflation outlook in its monetary policy decision,” he added.

Eugenia Victorino, economist at Australia’s ANZ Research, said domestic demand was running strong and entrenched. The fact that core inflation has been averaging in the middle of the central bank’s inflation target range indicates that demand pull price pressures are firm, she added.

“We maintain our view that tighter monetary policy is necessary to keep inflation expectations anchored to the central bank’s target range. The recent passage of the first phase of tax reform will put further upside pressure to headline prices,” Victorino said.

Analysts from Land Bank of the Philippines, and Ateneo de Manila University provided the lowest estimates of 3.2 percent.

LandBank market economist Guian Angelo Dumalagan said inflation likely fell in December, due mainly to slower annual increases in oil prices, food costs and government spending.

“The unexpected appreciation of the local currency might have also contributed to lower inflation by making imported goods more affordable in local currency terms. Despite lower inflation this month, the rate of increase in consumer prices might pick up in January because of the newly approved tax bill,” he explained.

Dumalagan said weaker inflation would give monetary authorities more room to keep policy rates steady even as a rate hike this year was still generally expected amid persistent monetary tightening by the US Fed and the inflationary impact of higher taxes.

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