Inflation further eases to 2.4% in Jan

MANILA, Philippines - Consumer prices rose at their slowest pace in nearly a year-and-a-half due to a contraction in prices of housing, water, electricity, gas and other fuels, as well as transport.

In a report, the Philippine Statistics Authority (PSA) said inflation  decelerated to 2.4 percent in January, down from 2.7 percent in December. The latest figure is the slowest pace since inflation settled at 2.1 percent in August 2013.

Without food and oil prices, core inflation dropped to 2.2 percent in January from 2.3 percent in December.

“January inflation at 2.4 percent is largely due to slowdown in annual movements of utilities, gas and transport. It falls within our forecast range and bolsters our view of within-target inflation over our policy horizon,” Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said.

Last month’s headline number is within the 1.8 to 2.7 percent forecast range of the BSP. For the full year, the BSP keeps a two to four percent target for inflation.

“We will continue to monitor developments particularly in international oil prices and their impact on financial market volatilities and inflation expectations to see if there is need to make adjustments to our policy levers,” Tetangco said.

Monetary authorities kept key policy rates steady in December as inflation expectations remained within the target ranges until 2016. Earlier in 2014, the overnight borrowing and overnight lending rates were hiked by a total of 50 basis points to anchor inflation.

Looking at inflation by region, the rate in the National Capital Region decreased to 1.5 percent in January from 1.6 percent in December. Areas outside the capital, meanwhile, saw the rate fall to 2.7 percent from three percent.

By commodity group, the housing, water, electricity, gas and other fuels index and the transport index continued to be in the negative in January at -2.1 percent and -1.3 percent, respectively.

At the same time, the food and non-alcoholic drinks index went down to 5.4 percent in January from 5.5 percent in December, while the furnishing and household equipment index fell to 2.4 percent from 2.6 percent.

The clothing and footwear index dropped to 3.2 percent from 3.5 percent, while the restaurant and miscellaneous goods and services index also sank to 1.6 percent from 1.8 percent.

The health index dwindled to 2.7 percent in January from 3.1 percent in December, while the communication index eased to 0.0 percent from 0.1 percent. The recreation and culture also declined to 1.2 percent from 1.4 percent.

However, the alcoholic beverages and tobacco index climbed to 4.1 percent in January from four percent in December, while the education index during the period remained at 5.1 percent from a month prior.

UK-based Barclays, in a research note yesterday, said inflation is expected to remain within the central bank’s range for this year.

“We remain comfortable with our 2.3 percent average inflation forecast for 2015. We expect inflation to stay broadly within the BSP’s two to four percent target range this year, given energy price falls and easing rice inflation,” Barclays said.

The bank added, “We continue to forecast the next policy rate hike to take place in the fourth quarter of 2015.”