Inflation to remain below target – DOF

Slow core inflation in the first quarter is a sign consumer prices would likely remain tamed at least in the near term, the chief economist of the Department of Finance said.

“Below-target inflation rate may continue to be realized at least in the short- term,” Finance Undersecretary Gil Beltran said in an economic bulletin dated April 5.

“Core inflation, which is an indication of future inflation, continues to fall under two percent,” he added.

Core inflation pertains to price changes of basic goods and commodities, excluding food and energy prices which are considered volatile or sensitive to global market swings.

Consumer prices rose 1.1 percent in March and in the first three months, falling below the central bank’s two- to four- percent target for the year, the Philippine Statistics Authority reported last week.

Sought for comment, Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said Beltran meant that even if dropping oil prices is removed, there is little reason for prices to go up.

He did not agree with his assessment though, saying the commodity has already recovered some ground from its 40-percent slump last year.

Around 80 percent of the country’s oil requirements are being imported. Higher import costs translate to higher end-user selling prices and vice-versa.

“There is a lag in the effect of rising oil prices to local pump prices. There is a lag and also secondary effect so that may push inflation up,” Neri said in a phone interview.

Luz Lorenzo, economist at Maybank ATRKim Eng, had a different view.

“Oil prices remain low and it remains a drag to inflation,” Lorenzo said in a separate phone interview.

The Bangko Sentral ng Pilipinas has forecast inflation rate to hit 2.1 percent this year, down slightly from 2.2 percent originally.