Philippine’s headline and core inflation both moderated in June. Even if a weaker reading was expected, the magnitude of the moderation was on the higher side. Consumer prices were up 0.1 percent sequentially, as overall price rises were tempered by a drop in utilities and transport costs. Core inflation dropped for the second consecutive month.
According to an ANZ research report, the Philippine inflation is expected to reach 3 percent in 2017 and 3.3 percent in 2018, which is well within the central bank’s 2 percent 4 percent target range. While the economic growth might have already topped out, domestic demand continues to be buoyant.
Meanwhile, the anticipated tax reform package would structurally increase private consumption not just with the cut in personal income taxes but also with the payment of the other compensatory measures for low income households, stated ANZ.
The rise in excise taxes on fuel and automobiles would also hike transportation costs that account for 8 percent of the CPI basket.
In the meantime, the Philippine central bank is now expected to hike rate just once by 25 basis points in the fourth quarter of 2017 and hike twice in the first quarter of next year, said ANZ. Credit growth continues to accelerate in spite of the easing momentum in economic activity.
