Inflation expected to moderate in 2nd half — BSP
INFLATION may have already peaked this year, with the rate of price increases expected to soften in the coming months on the back of lower oil prices, a senior central bank official said.
BSP Deputy Governor Diwa C. Guinigundo said the pace of price increases will likely moderate during the second half, which would bring the full-year tally closer to the central bank’s 3.1% forecast.
“It may have likely peaked already when it hit 3.4%,” Mr. Guinigundo told reporters on Friday, referring to the monthly readings logged in March and April.
The senior central bank official noted that latest estimates point to a possible pickup in prices at 3.4% in August, but said that this projection could soften given that the decline in oil prices and commodity prices have been generally “moderate.”
Inflation has averaged 3.1% during the first half, marked by June’s 2.8% reading which was a five-month low but still well within the central bank’s 2-4% growth goal. The pace of price increases is expected to slow to 3% annually in 2018 and 2019.
BSP Governor Nestor A. Espenilla, Jr. said inflation is expected to stay close to the 3% level over the next three years on the back of lower world crude prices, the moderation in domestic growth momentum, and the recent appreciation of the peso.
Meanwhile, economic growth is seen to remain intact, with latest data pointing to “robust picture” for the rest of the year.
Gross domestic product expanded by 6.4% during the first three months, slower than 6.6% climb posted during the fourth quarter of 2016.
Mr. Guinigundo said the manageable inflation environment gives the BSP room to keep borrowing rates steady, especially with reduced “pressure” coming from the United States’ future policy moves.
“In the past, we have a saying as well that we don’t have to respond immediately… we have our own idiosyncratic considerations of the domestic economy,” Mr. Guinigundo said during the briefing.
The senior central bank official said there were lower chances of a rate hike from the Federal Reserve within the year, with the next move expected during the first quarter of 2018.
“It’s something we need to consider, but in the general scheme of things, we don’t expect the US Fed to continue exerting pressure on us to start considering a possible policy tightening in the Philippines,” Mr. Guinigundo added.
The US Fed has introduced two rate increases of 25 basis points each in March and June this year, on track with earlier plans towards rate normalization. — Melissa Luz T. Lopez
