Lower increases noted in food, housing, utilities
MANILA, Philippines - Inflation eased in September amid slower prices increases in food, housing and utility.
In a report, the Philippine Statistics Authority (PSA) said inflation settled at 4.4 percent last month, down from 4.9 percent in August but still higher than the 2.7 percent in September last year. The latest figure was within the Bangko Sentral ng Pilipinas’ forecast range of 4.1 to 4.9 percent for September.
“This puts the year-to-date average at 4.4 percent, giving us more confidence that the 2014 full-year average will be within target,” BSP Governor Amando M. Tetangco Jr. said.
The central bank’s full year target range for inflation stands at three to five percent.
“Nevertheless, we continue to be mindful of the risks to the path of inflation over the medium term, which include financial market volatilities that may result from monetary policy normalization, the impact of geopolitical developments on prices of commodities, as well as changes in market inflation expectations,” Tetangco said.
Monetary authorities have so far raised key policy rates by 50 basis points this year to ensure inflation will remain within target for this year and the next.
At the same time, the reserve requirement ratios and the special deposit account rate have been increased to rein in excess liquidity in the markets.
Taking out the volatile food and fuel prices core inflation in September settled at 3.4 percent, unchanged from the previous month.
Inflation in the National Capital Region slowed to 3.5 percent in September from 4.4 percent in August. Areas outside the NCR, meanwhile, saw the rate decelerate to 4.7 percent from five percent.
By commodity group, the food and non-alcoholic drinks index eased to 7.4 percent in September from 8.3 percent in August, while the housing, water, electricity, gas and other fuels index slid to 2.2 percent from 2.7 percent.
The country also saw a decline in the transport index to 0.7 percent in September from 1.1 percent in August.
Rahul Bajoria, economist at Barclays, said that while domestic inflation is now seen settling within the full-year goal, risks still remain especially for next year.
“The Bangko Sentral ng Pilipinas has lowered its target inflation range for 2015 to two to four percent, which creates some concerns about the upper bound of the range being breached next year,” Bajoria said.
Emilio S. Neri Jr., lead economist at the Bank of the Philippine Islands, said the deceleration of inflation in September may prompt a pause in BSP’s tightening measures.
“The softer-than-expected increases the chances that BSP will stay neutral in their 23 October 2014 meeting, in contrast to the more aggressive policy move last September 11,” Neri said in a research note.
“BSP will more likely allow the effects of prior adjustments to work their way through the economy before making any significant pre-emptive adjustments, moreso that additional second-round effects were not evident as core was flat at 3.4 percent,” he added.