• Inflation likely up further in Feb – poll


    Inflation likely accelerated further in February and could prompt a hike in key interest rates this month, analysts polled by The Manila Times said.

    Forecasts for the month ranged from 3.8-4.5 percent with a 4.1 percent average, higher than the 4.0 percent recorded in January.

    The Bangko Sentral ng Pilipinas (BSP) also expects an increase to 4 percent to 4.8 percent, citing higher power and food prices as well as the implementation of a new tax law.

    Official February data will be released on Tuesday by the Philippine Statistics Authority.

    All 10 analysts said the year-ago rate of 3.3 percent would have been surpassed as pressures from food, power and fuel price hikes would have boosted consistently higher inflation seen since the start of 2017.

    Sustained price pressures
    “Our forecast for February 2018 inflation is at 4.5 percent amid the sustained increase in the prices of food items like rice, fruits, beef and pork,” Metrobank Research head Marc Bautista said.

    Furthermore, higher gasoline prices and electricity rates following the imposition of excise tax increases also contributed, he added.

    However, “we don’t expect rate hikes this March though as the pressure is expected to be transitory anyway,” Bautista said.

    Land Bank of the Philippines market economist Guian Angelo Dumalagan also forecast higher inflation of 4.4 percent given faster food and fuel price increases.

    “The costs of these two items likely accelerated because of the continued depreciation of the peso against the greenback and the hike in excise taxes under the Train (Tax Reform for Acceleration and Inclusion) law,” he said.

    Dumalagan also said a weaker peso had put pressure on prices as it made imported goods more expensive in local currency terms.

    Despite normalizing conditions in areas hit by Typhoon Vinta last year, agricultural prices likely remained elevated on account of new weather disturbances, including Typhoon Basyang that hit some parts of the Visayas and Mindanao in February, he also noted.

    “The BSP might take a defensive approach this month by increasing policy rates by 25 bps (basis points) in order to tame price pressures and protect the peso from further depreciation,” Dumalagan said.

    Rise seen
    Maybank Kim Eng and Security Bank Corp. analysts, meanwhile, believe inflation rose to 4.3 percent last month given a spike in rice prices amid news of a shortage, higher excise taxes on select products, power rate hikes, a weaker peso and elevated crude prices.

    “We see monthly inflation rate staying north of 4 percent — potentially as high at 4.7 percent at mid-year, which is well over the BSP inflation target range so [we]see the central bank hiking its rate 25 bps at [its]next meeting on 22 March,” Maybank Kim Eng Regional Head for Economic Resarch Suhaimi Ilias said.

    This was echoed by Security Bank’s Treasury Group economist and Assistant Vice-President Angelo Taningco, who said: “Given that inflation for the month was probably higher and above the government’s inflation target range, and coupled with peso depreciation, I think the BSP may raise its policy rate by 25bps in its March monetary policy meeting.”

    An estimate of 4.2 percent, meanwhile, was offered by Natixis economist Trinh Nguyen, who also pointed to higher electricity and food prices as well as the pass-through of excise taxes on petroleum products and sweetened beverages.

    “These build-up of price pressures will last and cause the BSP to raise rates by 50 bps in 2018, which will support the peso from its recent underperformance,” she said.

    University of Asia and the Pacific (UA&P) and Standard Chartered Bank both offered a 4.1-percent forecast.

    “I think March 22 they will raise policy rates, after the Fed makes its first increase for 2018,” UA&P economist Victor Abola said.

    London-based research consultancy Capital Economics and banking giant HSBC, on the other hand, both projected a slowdown in February inflation.

    “Having risen more sharply than expected in January, we think inflation will drop back slightly to 3.9 percent in February. This should give the Philippines central bank the reassurance its needs to keep policy loose,” Capital Economics said.

    The lowest estimate of 3.8 percent came from Singapore-based bank DBS, with economist Gundy Cahyadi focusing on the impact of tax reforms on general prices.

    “At this juncture, we think that the impact was more of a knee jerk, although a more pronounced implication may still be felt through the impact on underlying price expectations,” he said.

    As it is, Cahyadi noted that higher food prices and possibility of higher crude oil prices were enough to drive up price expectations going forward.


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