StanChart, DBS see October inflation easing further

MANILA, Philippines - Banks believe inflation remained muted last month on the back of stable food prices as well as lower pump prices of petroleum products and cheaper utility rates.

Standard Chartered Bank said inflation likely eased further to a new record low of 0.3 percent in October from 0.4 percent in September.

“We expect inflation to have remained muted, easing to 0.3 percent in October from 0.4 percent in September,” Standard Chartered said.

The bank explained energy inflation likely dragged down the headline number as gasoline and diesel prices were cut in October.

It added food prices remained stable last month although expected to increase in the coming months.

“With last year’s high base effect likely to affect data in the coming months and no inflationary pressure on prices of most items in the consumer price index, we expect inflation to remain benign and below trend levels until year-end,” the bank said.

Gundy Cahyadi, economist at DBS Bank Ltd, said inflation likely settled at 0.5 percent last month.

Cahyadi said benign inflation as well as strong gross domestic product (GDP) growth would give the Bangko Sentral ng Pilipinas (BSP) more room to keep interest rates steady.

“Despite the softer inflation outlook, a rate cut doesn’t look imminent for now. Not as long as GDP growth momentum remains fairly strong, which is currently the case,” he added.

Monetary authorities have tagged the impact of the prolonged and severe El Niño weather condition as one of the factors that could push inflation higher.

However, he explained there would be pressure on the BSP to lower interest rate as the US Federal Reserve is unlikely to be aggressive in tightening its monetary policy.

“This is especially since several central banks in the region have been relaxing their monetary policy stance as well. On this front, the BSP’s stance on the peso will be interesting to monitor. Should the BSP feel the need to facilitate a softer currency, some policy loosening may be in the offing,” he said.

The BSP sees inflation settling between 0.1 and 0.9 percent in October amid the minimal impact from the damage caused by Typhoon Lando that battered provinces in northern and central Luzon.

BSP Governor Amando Tetangco Jr. earlier said the impact of Lando would be wiped out by lower gasoline prices and cheaper power rates.

“Transitory uptick in food prices in Lando-affected areas, higher LPG and diesel prices could be offset by downward adjustments in power rates and regular gasoline prices,” Tetangco said.

The National Disaster Risk Reduction and Management Council (NDRRMC) earlier placed the cost of damage to agriculture and infrastructure caused by Typhoon Lando at more than P9 billion.