Inflation slows to 3.9% in March

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The country’s annual headline inflation eased in March to 3.9 percent from 4.1 percent in February due to a price slowdown recorded in utilities and other commodity groups.

The latest rate remains within the 3.7 percent to 4.6 percent forecast range of the Bangko Sentral ng Pilipinas (BSP).

It also supports the central bank’s manageable inflation outlook, BSP Governor Amando Tetangco Jr. said.

“That said, we will continue to be watchful of global developments—shifts in the [US] Fed stance, geopolitical risks, growth prospects and financial market developments in China. We will also continue to monitor system domestic liquidity to ensure there are no financial stability risks building up,” he said in a text message to reporters.


The 3.9 percent inflation in March marks an acceleration from the year-earlier rate of 3.2 percent.

Explaining the price slowdown in March from February, the Philippine Statistics Authority (PSA) said: “The downtrend was due to slower annual hikes posted by the indices of alcoholic beverages and tobacco; housing, water, electricity, gas and other fuels; recreation and culture; and restaurant and miscellaneous goods and services.”

In Metro Manila, the annual inflation rate in March this year grew to 2.9 percent from 2.8 percent in February.

In areas outside Metro Manila, the pace of annual inflation slowed to 4.2 percent from 4.5 percent the previous month.

Analysts at global bank HSBC said the negative short-term supply shocks from Super Typhoon Haiyan (Yolanda) are fading, dampening food and housing prices. This has become evident from the fact that the March annual inflation rate decelerated from the month before.

Interest rates may move by end-Q2
HSBC expects that with inflation staying within the central bank’s target range, interest rates are likely to remain steady in the next monetary policy meeting on May 8.

“However, with the summer months approaching and electricity and food prices likely increasing, we expect inflationary pressures to rise by end of the second quarter of 2014, causing the BSP to raise rates slowly, starting with an increase of 25 basis points on June 19, 2014,” it added.

Earlier, the BSP announced that it has lowered its inflation forecast for this year to 4.2 percent from its previous projection of 4.3 percent as inflation expectations remain broadly aligned with its 3-percent to 5-percent target band.

A benign inflation environment has also prompted the central bank to maintain interest rates for overnight borrowing so far at 3.5 percent and overnight lending at 5.5 percent.

But it has decided to raise the reserve requirement ratio (RRR) for commercial banks by 1 percentage point to 19 percent effective from April 4, reflecting a slight policy-tightening move to prevent a rapid rise in liquidity and credit expansion, which otherwise, could threaten the stability of the country’s financial system.

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