BSP OPTIMISTIC

Inflation seen benign in 2015

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The Philippine central bank is optimistic that the inflation environment in the country next year will be more conducive to business and economic activity as supply-related problems are now being addressed.

Diwa Guiniguindo, Bangko Sentral ng Pilipinas (BSP) deputy governor, told reporters on Tuesday that despite the upside risks posed by the possible hike in electricity prices and a power shortage next year, there could also be mitigating factors to offset such price pressures.

Citing for instance the onset of the next harvest season, the delivery of imported rice and improved transport of food shipments from the Manila ports to the provinces, Guinigundo said there is bound to be an increase in available food supply in the country.

“With the harvest season, more imports of rice, and then much less port congestion, I think that will all help in bringing about a more conducive inflation environment,” he said.


Improving food supply
Guinigundo cited the government’s efforts to decongest the Manila ports to facilitate the movement of cargoes to various points throughout the country, along with the move to import rice from Thailand and Vietnam.

In September, the City of Manila decided to end the implementation of a 5 a.m. to 9 p.m. truck ban to give way to national government efforts to decongest the capital city’s ports.

During the same month, the National Food Authority also announced that Thailand and Vietnam would supply a total of 500,000 tons of rice to the Philippines under government-to-government deals.

Recently, the central bank adjusted its inflation forecast for 2015 to 3.8 percent from 3.7 percent, still within its 2 percent to 4 percent target range for the year.
Diminishing price pressures

ING Bank senior economist Joey Cuyegkeng noted in his latest analysis that there are even more downside pressures on the bank’s inflation forecast for 2015.

“We also expect the negative base effects on inflation to turn more favorable in 2015,” increasing the “downside risk to our inflation forecast of 3.9 percent average 2015 inflation rate,” he said.

Cuyegkeng said inflation for 2015 is likely to gravitate toward the midpoint of the 2 percent to 4 percent inflation target range of the BSP.

“Tight supply conditions and delay in shipments are being addressed and that is likely to generate only modest but declining price pressures,” he said.

On the other hand, Cuyegkeng said financial market volatility resulting from the normalization of US monetary policy could be more moderate than expected, while slower global growth and lower commodity prices are seen by a number of Federal Reserve policymakers as reasons for a possible delay in the timing of their rate hike.

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