Lower food, Energy prices Inflation slips further to 0.9% in Feb

MANILA, Philippines - Inflation slipped to its lowest level in four months as it fell below one percent due to lower food prices and cheaper energy, data released by the Philippine Statistics Authority (PSA) showed yesterday.

The country’s inflation eased for the second straight month to 0.9 percent in February from 1.3 percent in January. This was the lowest since the consumer price index rose to 1.1 percent last November.

Inflation last month was at the lower end of the forecast range of 0.9 percent to 1.7 percent set by the Bangko Sentral ng Pilipinas (BSP).

BSP Governor Amando Tetangco Jr. said the slower inflation in February was caused by declines in inflation for housing, utilities, gas, and transport.

Tetangco said monetary authorities would remain watchful of emerging second round effects from the rebound in oil prices as well as global growth prospects.

 “We will continue to monitor price movements, including emerging second round effects from global oil prices and any shifts in global growth prospects, as these impact domestic growth and inflation dynamics and see if there is need to make any adjustment in policy levers,” Tetangco said.

Core inflation – which excludes selected food and energy items – continued to decelerate to 1.5 percent in February, slower than 2.5 percent in the same period a year ago and from 1.8 percent a month ago.

Inflation in Metro Manila moved at a slower pace of 0.1 percent in February from 2.2. percent in the same period a year ago. In January, inflation in the National Capital Region  (NCR) was recorded at 0.6 percent.

PSA said the slower rise in inflation in NCR was due to slower increases in the prices of housing, water, electricity, gas and transport fuel.

Inflation in areas outside Metro Manila likewise slowed down to 1.2 percent in February from 2.6 percent a year ago. In January, inflation in these areas rose by 1.5 percent.

Eugenia Victorino, economist at ANZ Bank, said inflation slowed more than expected in February and the monthly pullback in food prices was the largest since 2008.

However, ANZ Bank said the decline in food prices is transitory and inflation would slowly edge up through 2016.

The central bank expects inflation to settle at two to four percent between 2016 and 2018.

Earlier, BSP Deputy Governor Diwa Guinigundo said the Monetary Board slashed its inflation forecast to 2.2 percent instead of 2.4 percent but retained next year’s projection at 3.2 percent.

Guinigundo cited the roll back in the minimum fares for jeepneys to P7 from P7.50 last January as well as the lowering of the forecast for Dubai crude oil to $31.62 per barrel instead of $44.90 per barrel this year and to $37.53 per barrel instead of $50.29 per barrel next year.

He added inflation turnout at 1.5 percent for December and 1.3 percent for January were lower compared to the forecast of the Monetary Board.

Last Feb. 11, the BSP has kept interest rates steady for 11 straight policy-setting meetings since October 2014 amid the robust domestic demand and the manageable inflation dynamics.

The overnight borrowing rate is currently pegged at four percent while the overnight lending rate is at six percent since September 2014. The interest rates on special deposit accounts remained at 2.5 percent while the reserve requirement ratios were likely left unchanged. – With Czeriza Valencia