Inflation upturn seen in Q1 2020

Published October 13, 2019, 12:00 AM

by manilabulletin_admin

By Lee C. Chipongian

Prolonged lower consumer prices will continue to prevail over the holiday season with increases expected to be felt starting late December this year, at the earliest, or in the first quarter of 2020.

Bangko Sentral ng Pilipinas (BSP) logo

Bangko Sentral ng Pilipinas Deputy Governor Francisco G. Dakila Jr. said base effects will pull inflation higher and this will likely happen – at the earliest – in the late fourth quarter 2019 or next year. This is much later than the fourth quarter 2019 previous forecast by the BSP.

“The lowest inflation rate was recorded in the third quarter (2019) and a slight increase will happen either in the first quarter 2020 or late fourth quarter this year,” Dakila said in Filipino.

“But, the most important thing is the average for 2020 – at this point – we still see it at 2.9 percent,” said Dakila. The BSP’s 2020 and 2021 inflation forecasts are the same or 2.9 percent, well within the target range of two percent to four percent.

Last month, the BSP said inflation average which will hit its lowest in the third quarter this year will increase in the fourth quarter – all due to base effects.

For 2019, Dakila said it is becoming apparent that inflation average will “stick” to 2.5 percent. “More or less it will be that rate (2.5 percent for 2019),” he said.

Inflation rate further dropped to 0.9 percent in September from 1.7 percent last August, bringing the nine-month average to 2.8 percent.

The BSP on September 26 cut its inflation forecast lower to 2.5 percent from 2.6 percent (August 8) and on that same day, the Monetary Board reduced the policy rate by 25 basis points (bps) for the third time since May.

The Monetary Board only has two policy meetings remaining for 2019, on November 14 and December 12.

Dakila said they will have crucial advisory meetings to the Monetary Board next week and another in November to review inflation outlook for 2020 and 2021.