Philippine consumer price inflation slows down in January, BSP likely to stand pat this week

The consumer price inflation of Philippines decelerated in January. On a year-on-year basis, the headline inflation came in at 4.4 percent, a slowdown from December’s 5.1 percent. After two straight falls, the consumer price inflation rose 0.2 percent on a sequential basis because of a rise in food prices and the effect of domestic tax policy changes. Significantly, the core inflation came in at 4.4 percent year-on-year, implying that underlying pressures have eased providing support to the BSP’s expectation of inflation under 4 percent year-on-year by the first quarter of 2019, noted ANZ in a research report.

Annual headline inflation has lowered sharply in recent months partially because of an easing of supply pressures, especially for food items, and lower crude oil prices. The rate of fall might decelerate going forward. Oil prices have rebounded recently and evidence implies that rice prices might be bottoming out. Sequentially, food prices rose 0.4 percent in January, on a rise in fish and vegetable prices.

From the BSP’s perspective, the easing in core inflation is very encouraging. It implies that underlying pressures are easing, in line with some moderation in domestic demand.

“Broadly, we expect inflation near the 4 percent upper limit of the BSP’s target in the coming months. Supported by a more balanced outlook for inflation, we expect the BSP to keep rates unchanged at its meeting on Thursday”, added ANZ.