BSP forecasts below 5% inflation in January

Published January 31, 2019, 12:00 AM

by manilabulletin_admin

By Lee Chipongian

The Bangko Sentral ng Pilipinas (BSP) said inflation for the month of January could be as low as 4.3 percent from December’s 5.1 percent because of the lower rice prices and electricity rates during the period.

The BSP forecasts a January inflation range of 4.3 percent to 5.1 percent.

A logo of the Bangko Sentral ng Pilipinas is seen at their headquarters in Manila, (REUTERS/Romeo Ranoco / MANILA BULLETIN)
A logo of the Bangko Sentral ng Pilipinas is seen at their headquarters in Manila, (REUTERS/Romeo Ranoco / MANILA BULLETIN)

The BSP Department of Economic Research said that “domestic oil price hikes –due to higher international crude oil prices and the second tranche of the excise tax adjustment from the TRAIN Law — is seen to be the primary driver of inflation for the month.”

“In addition, higher fish and vegetable prices due to colder weather conditions and the annual adjustments in the excise taxes of alcoholic beverages from the Sin Tax Law could result in additional upward price pressures,” said the BSP.

The central bank, however, thinks inflation rate could break five percent to a low of 4.3 percent because of lower rice prices, downward adjustment in electricity rates, and the “slight appreciation of the peso.”

“Looking ahead, the BSP will remain watchful of evolving inflationary conditions to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” said BSP officials.

Based on a December 2018 BSP survey, it said private forecasters expect this year’s average inflation to hit 4.1 percent, while in 2020 it could be 3.8 percent.

The private forecasters’ estimates were higher than BSP’s 3.2 percent and three percent forecasts for 2019 and 2020, respectively.

The BSP said its latest inflation forecasts indicate that numbers will settle within the target range of two-four percent and that a slowing inflation momentum will continue as global crude oil prices ease, food supply conditions normalize, and the exchange rate further stabilizes. The easing price pressures were also a result of the Monetary Board’s 175 basis points adjustments to the policy rate last year.

In the meantime, the key upside risks to inflation continue to be the potential volatile global oil prices, possible depreciation of the peso against the US dollar, and increased demand due to upcoming school enrollment and during the holiday season. There are also insistent geopolitical risks such as trade tensions and the expected rise in transport fares and utility rates.