Philippine headline inflation eased further to an all-time low of 0.6 percent in August from 0.8 percent in July as oil prices continued to lose steam, the latest data from the central bank showed on Friday.
The slide was sharper when compared with the 4.9 percent headline inflation recorded in August last year.
The latest rate fell within the forecast range of 0.5 percent to 1 percent by private analysts polled by The Manila Times, and the 0.2 percent and 1 percent band projected for the month by the Bangko Sentral ng Pilipinas (BSP).
The BSP traced the slowdown in August to year-on-year declines in utility rates and transport fares as a result of lower oil prices.
“The August inflation figure is well within our forecast range and helps to keep us on track to the path of within-target inflation for 2016 and 2017,” BSP Governor Amando Tetangco Jr. told reporters in a text message on Friday.
For 2016, the BSP expects the average inflation rate to hit 2.5 percent.
Tetangco said the BSP “will make adjustments to policy if needed to ensure just enough liquidity in the market so the favorable inflation path is sustained.”
Core inflation 1.6% vs yr-ago 1.9%
Core inflation, which excludes food and energy prices, slowed to 1.6 percent in August from 1.9 percent in July and from 3.4 percent a year earlier.
From January to August, core inflation averaged 2.2 percent. Including those prices, headline inflation for the year-to-date averaged 1.7 percent, falling below the 2 percent to 4 percent target range of the central bank.
The Philippine Statistics Authority (PSA) said the indices for housing, water, electricity, gas and other fuels and transport posted annual declines.
The “annual increments also decelerated in all the other commodity groups except in the indices of communication, education; and restaurant and miscellaneous goods and services,” it added.
Inflation in Metro Manila moved at a slower pace of 0.2 percent from 4.4 percent a year ago. Consumer prices outside Metro Manila moved up 0.8 percent, against 5 percent in the year-ago period.
‘Low inflation to boost demand’
The low inflation environment that prevailed in the first eight months of 2015 has supported domestic demand, particularly household consumption, the National Economic and Development Authority (NEDA) said.
“[W]e expect this to persist throughout the rest of the year,” NEDA Director General and Socioeconomic Planning Secretary Arsenio Balisacan said in a statement issued on Friday.
Balisacan said food inflation and international oil prices are expected to remain low and will constrain any upward price movements in the near term.
However, he warned that an expected worsening of the dry weather conditions from El Niño in the coming months until early 2016 could still pose an upside risk to inflation.
More policy headroom
In an economic bulletin issued separately, the Department of Finance said inflation sustained at low levels will give policymakers more headroom to respond to external and internal economic shocks.
Finance Undersecretary Gil Beltran also added a word of caution about the impact of El Niño, saying it could undermine previous gains made by the economy as a prolonged dry weather spell could put upward pressure on food prices, water bills and hydro-electric generation rates.
“The government and the private sector should cooperate in crafting the appropriate policy response,” he said.