Inflation seen easing further this month

MANILA, Philippines - Inflation may ease further this month from the 2.7 percent recorded in December amid the lower cost of food and the continued decline in oil prices, the Bangko Sentral ng Pilipinas said.

BSP Governor Amando M. Tetangco Jr. said the rate could settle within 1.8 to 2.7 percent in January.

“BSP’s assessment shows continued easing of price pressures,” Tetangco said, adding that the “latest runs show domestic inflation over the policy horizon will be well within the target range.”

Inflation decelerated to 2.7 percent in December from 3.7 in November following the continued fall in international oil prices and lower increases in the cost of key food items in the domestic market.

This resulted in a 4.1-percent average for inflation last year, well-within the three to five percent target range. For this year and the next, the BSP has a narrower two to four target range.

“The BSP will watch economic and financial developments, including the balance of global liquidity, its impact on global inflation and growth dynamics, and how these would translate to investor sentiment, financial market moves, and domestic market inflation expectations,” Tetangco said.

Earlier this month, Tetangco said the risks to the inflation outlook remain “broadly balanced” as upside price pressures include the pending petitions for power and water rate hikes and the foreseen tight power supply during the summer.

However, this should be countered with the drop in international oil prices leading to lower domestic pump prices, cuts in transport costs, and also a decrease in the prices in some imported commodities.

Monetary authorities in October and December last year kept key policy rates steady as inflation expectations fell within the target ranges until 2016.

Overnight borrowing and overnight lending rates were held at four percent and six percent, respectively, after a 50-basis-point hike done in the third quarter to anchor inflation expectations.