Inflation eases to 4.3% in Oct

MANILA, Philippines - Inflation slowed for the second straight month in October on lower food prices, giving the Bangko Sentral ng Pilipinas more room to keep policy settings unchanged.

In a report, the Philippine Statistics Agency (PSA) said inflation eased to 4.3 percent in October from 4.4 in September. The figure fell within the BSP’s forecast range of 3.7 percent to 4.6 percent.

Without food or oil prices, core inflation also rose at a slower pace of 3.2 percent in October from 3.4 percent a month ago.

“The October inflation print should help keep inflation expectations in check, especially in light of more favorable money supply conditions as M3 (the broadest measure of domestic liquidity) has continued on its deceleration path. These developments give us room to pause,” BSP Governor Amando M. Tetangco Jr. said.

“Nevertheless we will continue to monitor how our previous policy actions are filtering through to the economy and see if there would be need for adjustments in our policy levers,” he continued.

The central bank last month left key policy rates unchanged as inflation expectations now fall within the goals for this year until 2016. Earlier, monetary authorities raised the overnight borrowing and overnight lending rates by a total of 50 basis points to ensure inflation will remain within target.

At the same time, the BSP earlier raised the reserve requirement ratios and the special deposit account rate to rein in excess liquidity in the system.

In the first 10 months of the year, inflation stood at 4.3 percent, above the midpoint of the BSP’s three to five percent target for the year.

Looking at inflation by region, the rate in the National Capital Region rose to 3.6 percent in October from 3.5 percent in September. Areas outside the capital, meanwhile, saw the rate ease to 4.5 percent from 4.7 percent.

By commodity group, the food and non-alcoholic drinks index slid to seven percent in October from 7.4 percent in September, while the clothing and footwear index fell to 3.4 percent from 3.6 percent.

The restaurant and miscellaneous goods and services index also dropped to 1.7 percent from 1.8 percent.

The deceleration in a number of indices were partly offset by an increase in the housing, water, electricity, gas and other fuels index to 2.4 percent in October from 2.2 percent in the previous month and the rise of the transport index to 0.8 percent from 0.7 percent, the PSA said.

Rahul Bajoria, economist at Barclays, said the October inflation reflected the falling oil prices in global markets. “The decline in inflation is likely to be gradual, but should continue through Q4 (the fourth quarter),” Bajoria said in a research note.

Barclays expects inflation to average 4.3 percent this year and by 3.8 percent in 2015.

“We expect Bangko Sentral to keep rates unchanged for the next few months, and in our view, it will look to raise rates only in Q2 (second quarter of) 2015,” Bajoria said. - With Ted Torres