Inflation to remain manageable – Metrobank

MANILA, Philippines - Inflation should continue to be manageable this year on lower oil prices and as the cost of food remains stable, the research arm of Metropolitan Bank &Trust Co. said in a report.

“Expect low inflationary pressure on the local front this 2015, as stable food prices and soft oil prices remain. The high 2014 base will also dampen pressures to the index,” Mabellene Reynaldo, research analyst at Metrobank, said in the latest Weekly Views from the Metro.

“Possible upside risks may come from power costs given shortages in the Luzon grid this summer and a sudden reversal in oil price movements,” she added.

Metrobank Research has forecast inflation to average 3.7 percent this year, above the midpoint of the central bank’s two to four percent target.

Last year, inflation averaged 4.1 percent as lower increases of food and the cuts in pump prices pulled down the rate in the fourth quarter.

The rate spiked between May to August last year on tight supply conditions but lower cost of a number of food items and the cuts in pump prices helped bring down inflation.

At the same time, the Bangko Sentral ng Pilipinas in the third quarter raised the overnight borrowing and overnight lending rates by a total of 50 basis points to ensure inflation targets until 2016 will be met. Key policy rates were kept steady during the last two rate-setting meetings of 2014.

The Monetary Board will revisit policy settings next month, on Feb. 12.

BSP Governor Amando M. Tetangco Jr. said last week the central bank has space to maintain the stance of policy as December inflation settled at 2.7 percent.

Upside risks to inflation remain to be the pending petitions for utility rate adjustments and the tight power supply conditions seen in the summer of this year.

But Tetangco said the decline in international oil prices should dampen the uptick in inflation.