Economists’ inflation views ease

BANK ECONOMISTS tempered their inflation forecasts for the year in the face of lower oil and utility prices, according to results of a recent central bank survey, although overall price increases are expected to rise faster in succeeding years.

A poll among private sector economists conducted on June 19-July 3 by the Bangko Sentral ng Pilipinas (BSP) yielded a median inflation forecast at 3.3% for 2017, lower than the 3.4% estimate in the March survey.

The figure compares to the central bank’s 3.1% projected average for the entire 2017 that was announced last month.

Broken down, the bank analysts expect inflation to average 3.3% this quarter before slowing to 3.2% in the October-December period, in keeping with the central bank’s expectation that price increases could peak some time between July and September.

If realized, the third- and fourth-quarter projections would be higher than the year-ago rates but would still keep within the BSP’s 2-4% target band.

The economists cited the slower pickup in world crude prices as the biggest reason for their tempered inflation outlook, driven by increased shale oil output from the United States which countered the impact of production cuts from members of the Organization of the Petroleum Exporting Countries since 2016.

Reduced electricity rates in June as well as lingering uncertainty about global growth prospects also prompted adjustments to economists’ inflation projections, the central bank said in its quarterly inflation report.

On the other hand, a weaker peso, transport fare hikes, increased spending on public infrastructure, “adverse weather conditions” and a fresh rate hike from the United States after three 25- basis- point increases since December last year could drive inflation readings higher this semester, the economists noted.

The BSP poll also bared a 3.5% median inflation forecast for the years 2018 and 2019, which is higher than the 3.0% official estimate as of the Monetary Board’s June 22 meeting.

BSP Deputy Governor Diwa C. Guinigundo said inflation may have already peaked this year when it logged 3.4% monthly readings in March and April, with lower oil rates keeping overall price increases in check.

Inflation has averaged 3.1% in 2017’s first six months.

In another report, the BSP said banks kept credit criteria unchanged in the second quarter, even as it noted some tightening on loans extended to businesses. —