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Analysts see slower Nov. inflation

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By Melissa Luz T. Lopez
Senior Reporter

INFLATION is widely expected to have slowed in November from a nine-year peak, as oil prices plunged and as food supply improved, analysts said in a BusinessWorld poll, noting this could allow the central bank to pause its policy tightening when it meets for the last time this year on Dec. 13.

A poll among 14 economists yielded a 6.3% median estimate for the month, with all market watchers certain that the rate will ease from October and September’s 6.7%.

At the same time, this will still be faster than the three percent pace logged in November 2017.

The estimate also falls within the 5.8-6.6% range given by the Bangko Sentral ng Pilipinas (BSP) last week, and would be the first decline in the rate since the year opened.

Analysts’ November Inflation Rate Estimates

The Philippine Statistics Authority (PSA) will report the latest inflation data on Wednesday.

“The global oil price collapse from mid-October through mid-November was the key trigger to the sharp drop in November CPI (consumer price index),” said Emilio S. Neri, Jr., lead economist at the Bank of the Philippine Islands.

Fuel companies announced price rollbacks for diesel and gasoline last month, reflecting declines in the benchmark Dubai crude by around 20% from October’s four-year highs.

In turn, the substantial drop in pump prices is broadly seen to offset higher jeepney and bus fares that took effect in November, which was the response of the Land Transportation Franchising and Regulatory Board to petitions filed by operators back when oil prices were at multi-year highs.

Nicholas Antonio T. Mapa, senior economist at ING Bank NV Manila, added that food prices have “substantially” gone down as supply has normalized, particularly for rice and vegetables.

The PSA has said that inflation has been “food-driven” in recent months.

Analysts noted that non-monetary interventions by the Executive, together with rice imports and local harvests have since boosted market supply and tempered price pressures.

“Also, mild weather conditions prevailed, allowing for better transport of goods and the continuing fall of oil prices,” added Alvin P. Ang, economics professor at the Ateneo de Manila University.

Monetary Board Member V. Bruce J. Tolentino said on Wednesday that price pressures have “subsided for now,” even as he cited the need to remove restrictions on imported rice to ensure low, stable prices for the staple.

The latest forecasts affirm the government’s view that inflation has already peaked, which observers took as a sign for policy makers to finally pause monetary tightening.

“Easing inflation will definitely decrease pressure to increase rate,” said Masyita Crystallin, economist at DBS Bank.

The central bank’s Monetary Board has raised rates by 175 basis points (bp) so far since May, with a “proactive” 25bp increase announced earlier this month despite signs that inflation is on a month-on-month downtrend going into 2019. Rates now range from 4.25 to 5.25%, with the 4.75% key rate the highest since 2009.

This comes after inflation steadied at the nine-year-high 6.7% in October from the previous month.

Inflation has averaged 5.1% year-to-date, still below the upgraded 5.3% full-year forecast of the central bank but well above the original 2-4% target range for 2018.

Ildemarc C. Bautista, head of research at the Metropolitan Bank & Trust Co., said the central bank may find room to cap its five straight hikes amid slower commodity price increases and a stronger peso that has lately been trading at the P52 level versus the dollar.