Inflation to remain 3.1%-3.2% in 3Q

Inflation rate is expected to range in a controlled level in the next three months of 3.1 percent to 3.2 percent with lower oil prices as well as steady food prices.

In its June “Market Call” report, First Metro Investment Corp. and University of Asia and the Pacific (FMICUA&P) estimate a June inflation of 3.1 percent, and 3.2 percent for July and August.

“Inflation should remain at around 3.2 percent until August since oil prices have been below $50/barrel (WTI) more often in May, while food prices continue to stabilize,” said FMIC-UA&P.

The Bangko Sentral ng Pilipinas (BSP) on Thursday, in its fourth monetary policy meeting for the year, cut its 2017 inflation forecast from 3.4 percent to 3.1 percent but retained the three percent forecast for 2018 – both previous forecasts were made in May. The BSP also thinks inflation will average at three percent in 2019.

“(Inflation) will be lower on a monthly path. In fact even the peak period of August and September, the expected monthly inflation for those two months will be lower compared to what we projected in May," according to Reuters quoting BSP Deputy Governor Diwa C. Guinigundo.

FMIC-UA&P supports its inflation outlook on a steady liquidity growth. It said money growth “remains moderate and the Monetary Board does not have a compelling reason to raise policy rates in the first half even if the (US Federal Reserve) Fed proceeds with a 25 basis point rate hike in June.”

The report said the Monetary Board’s reaction to the higher US interest rates “may occur in the third quarter at the earliest.”

Last Thursday, the BSP maintained its kept policy rates at three percent because of a still manageable inflation path.

As Guinigundo said, the BSP expects a lower path of future inflation and will stay within the official target range of two percent to four percent this year until 2019.