Philippine inflation eases to BSP’s target range in February, BSP likely to keep rates on hold in March

The Philippine headline inflation has come within the central bank’s target range in February after a year. The consumer price inflation decelerated to 3.8 percent year-on-year in the month from January’s 4.4 percent. A continued moderation in food prices (4.7 percent year-on-year in February) and softer core rate led to the easing of the headline rate.

Sequentially, the CPI came in at 0.2 percent sequentially, even as food prices eased by 0.3 percent in the same month. Rises in the ‘housing & utilities’ and ‘transport’ components contributed to the rise sequentially. Core rate rose 0.26 percent sequentially in the month.

The sequential rise notwithstanding, core inflation gas weakened noticeably on an annual basis. The number of items in the CPI basket rising by over 4 percent year-on-year has continued to taper off, noted ANZ in a research report.

The easing of core inflation is encouraging. This underpins the BSP’s view that headline inflation will ease to below 4 percent by the end of first quarter of 2019.

“We are of the view that the pace of decline will likely slow going forward. Oil prices have recovered recently and evidence suggests that rice prices may also be bottoming out.  Even so, headline inflation should remain within the BSP’s target in the coming months. Against this backdrop, we expect the BSP to keep rates unchanged at its meeting on 21 March”, added ANZ.