November inflation eyed below 2%, say

MANILA -- Philippine monetary officials’ projection that domestic inflation might have bottomed out last October can be seen in their forecast for November 2019, with the range set between 0.9 to 1.7 percent.

This range is higher than the 0.8-percent inflation rate last October but way lower than the 6 percent in November last year.

In a statement Friday, the Bangko Sentral ng Pilipinas (BSP) said its Department of Economic Research (DER) forecasts the November 2019 inflation to be driven by higher electricity rates, prices of gasoline, liquefied petroleum gas (LPG), and select food items.

“Meanwhile, inflation could be tempered by lower domestic rice prices and the appreciation of the peso,” it said.

“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 manCAGAYAN

date,” it added. After peaking at 6.7 percent in September and October 2018, the domestic inflation rate has generally declined to 0.8 percent last October. The average inflation rate in the first 10 months this year stood at 2.6 percent, at the lower half of the government’s 2 to 4-percent target range until 2021. During the rate-setting meeting of the BSP’s policymaking Monetary Board (MB) last November 14, the Board slashed its 2019 average inflation forecast to 2.4 percent from 2.5 percent previously after noting that base effect of year-ago’s elevated inflation rate starts to disappear. The 2020 and 2021 average inflation forecast was kept at 2.9 percent. UnionBank chief economist Ruben Carlo Asuncion targets the November 2019 inflation rate to climb to 1.3 percent as “last year’s base effect starts to dissipate”. Aside from base effects, the economist said upside risk to inflation may come from higher food prices due to weatherrelated factors and the impact of the African Swine Fever (ASF) on pork products. “The ASF may have caused prices of alternatives/substitutes to rise due to higher demand,” he said. Another reason for an uptick in the inflation rate is the higher consumption demand ahead of the Christmas season, he said. UnionBank forecasts inflation to average at 2.4 percent this year. Asuncion also cited that with average inflation this year staying within the government’s target band “there is ample traction to the BSP Governor’s recent mention of a potential rate cut in the Monetary Board’s December meeting.” BSP Governor Benjamin Diokno last week raised the possibility of another reduction in the BSP’s key policy rates after the 75 basis points cut so far this year as inflation continues to decelerate. The cuts were implemented this year after the key rates were increased by a total of 175 basis points last year to help reign in inflation expectations as a result of the increase in domestic rice prices.