Analysts expect Feb inflation to hit 1.1-1.4%

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INFLATION could ease to 1.1 percent or rise slightly to 1.4 percent in February, analysts polled by The Manila Times said, allowing monetary authorities to maintain accommodative policy rates.

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Official February data will be released on Friday. A year earlier, inflation settled at 2.5 percent. The rise in consumer prices moderated to 1.3 percent in January after two consecutive months of increases.

The Bangko Sentral ng Pilipinas has offered a forecast range of 0.9 percent to 1.7 percent, while the Department of Finance predicted a rise to 1.4 percent.

Providing the highest estimate among the analysts polled was ING Bank Manila senior economist Joey Cuyegkeng, who said inflation likely hit 1.4 percent this month as the impact of the El Niño weather pattern and agriculture problems continued.

“We expect a gradual increase in inflation rate to average at 2 percent this year, ending the year at around 2.7 percent. We are closely monitoring not only the impact of agriculture production but also oil with a possible March meeting of major oil producers,” Cuyegkeng said.

A slight rise, he said, is unlikely to prompt the Monetary Board to adjust its stance during a scheduled March 23 policy meeting.

“[The] external environment has stabilized for now although financial market participants remain on edge as to developments on oil producers’ discussions, China and G20 developments,” he said.

Joseph Incalcaterra, Asia-Pacific economist for banking giant HSBC, held the same forecast. He said inflation in February was likely to have been driven by higher food prices and excise tax rises.

Meanwhile, A&A Securities Inc. marketing and research head Justino Calaycay said inflation could have eased to 1.2 percent.

“Historically, January eases back from the spending-heavy December and fourth quarter and mainly steadies in February,” he said.

Jack Chambers, associate economist at Moody’s Analytics also sees inflation moderating to 1.1 percent.

“The main reason that inflation continues to be subdued is the effect low oil and commodity prices are having on energy prices in the Philippines,” he said.

Prices are also expected to show declines in other areas as well, such as housing and water, the economist added.

“Given that headline inflation will remain below the central bank’s target of 2 percent to 4 percent, this will allow it keep rates at their current, accommodative levels,” Chambers said.

Looking ahead, he expects the central bank to keep interest rates on hold until the fourth quarter of 2016.

“At this point we anticipate inflation will have increased and the bank will increase interest rates in response to this,” Chambers said.

The same 1.1 percent estimate was offered by Alvin Ang, professor at the Ateneo de Manila’s Department of Economics, who cited lower oil prices and lower transport costs.

Central bank Governor Amando Tetangco Jr., in explaining the central bank’s 0.9 percent to 1.7 percent projection for February, last week said:” The fall in rice, gasoline and LPG (liquefied petroleum gas) and provisional rollback in jeepney fares in certain regions are seen to dampen inflation pressures for the month. However, higher power rates and domestic prices of diesel and kerosene could exert upside pressure to inflation in February.”

The Finance department, meanwhile, tagged higher power rates, as well as an uptick in food and beverage prices, as reasons for its forecast.

During its first policy meeting this year, the Monetary Board kept the central bank’s overnight borrowing and lending rates at 4 percent and 6 percent, respectively.

The 2016 inflation forecast, however, was revised downward to 2.2 percent from 2.4 percent and that for 2017 was retained to 3.2 percent.

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