Moderate inflation seen until year-end

MANILA, Philippines — Growth in consumer prices is expected to continue its downtrend in October amid mixed expectations on the trajectory of headline inflation for the remainder of 2019, said London-based Capital Economics.

In a research brief over the weekend, the research firm kept its earlier pronouncement that the Bangko Sentral ng Pilipinas (BSP) may cut policy rates anew before the end of the year.

Consumer prices continued to ease, falling to a 40-month low in September, as the cost of the heavily weighted food, housing and utilities sectors contracted, the Philippine Statistics Authority (PSA) reported Friday.

Headline inflation, or the growth in the consumer price index, slowed further to 0.9 percent last month from 1.7 percent in August and a peak of 6.7 percent in September 2018.

This brought the year-to-date average to 2.8 percent, which is well within the government’s 2019 inflation target of between two percent and four percent.

The September rate is the lowest since May 2016 when inflation also registered at 0.9 percent.

PSA chief Dennis Mapa noted that based on historical data, an uptick in inflation usually occurs during the holiday season, but based on the current downward trend, the prevailing expectation is for the headline rate to move sideways or continue to decelerate.

The BSP, however, expects inflation to pick up slightly in the coming months because of the volatility in global crude oil prices.

“The big drop in inflation in the Philippines last month means another rate cut before the end of the year is looking increasingly likely,” said Capital Economics.

“Given our view that the headline rate will nudge down again in October and remain below the midpoint of the central bank’s two up to four percent target for the next 12 months, further easing seems likely. We are sticking with our view that the BSP will cut rates two more times this cycle,” it added.