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Inflation likely slowed further in Feb.

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“We think Philippines inflation will continue to slow down in February to 4.3% year-on-year, from 4.4% in January as the impact of increased excise taxes has continued to disappear. In addition, lower rice price in February might also contribute to lower inflation pressure,” said Masyita Crystallin, economist from DBS Bank.

By Melissa Luz T. Lopez
Senior Reporter

INFLATION likely maintained its descent in February as rice prices continued to drop, analysts said in a BusinessWorld poll, with some even betting the rate slid to below four percent.

A poll among 13 economists yielded a median estimate of 4.1%, which, if realized, will be lower than January’s 4.4% rate and will mean a four-month streak of declining inflation. This also falls within the 3.7-4.5% estimate given by the Bangko Sentral ng Pilipinas (BSP) last week.

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Inflation settled at 3.8% in February 2018. The Philippine Statistics Authority will release official inflation data tomorrow.

“We think Philippines inflation will continue to slow down in February to 4.3% year-on-year, from 4.4% in January as the impact of increased excise taxes has continued to disappear. In addition, lower rice price in February might also contribute to lower inflation pressure,” said Masyita Crystallin, economist from DBS Bank.




Security Bank economist Robert Dan J. Roces added that the signing of the rice tariffication law, which will replace import limits with tax duties, also provided some relief and has “already tamed inflation expectations” ahead of its March 5 effectivity.

Rice supply constraints led to faster inflation in the second half of 2018, which saw prices rise by as fast as 6.7%.

Five market watchers are even betting that inflation likely settled below four percent last month, which would mark the first time in a year the headline rate would settle within the 2-4% BSP target.

ING Bank senior economist Nicholas Antonio T. Mapa said lower prices of chicken, pork, fish and vegetables may have pulled inflation down to 3.8%, even if fuel rates went up during the month.

The stronger peso, which returned to the P51 level versus the dollar during the last two days of February, may have also helped temper import prices, they added.

However, there are mixed views about how this latest data will be taken by the BSP’s Monetary Board as they review policy settings during their March 21 meeting.

“This expected inflation level further fortifies a steady monetary stance,” said Ruben Carlo O. Asuncion, chief economist at UnionBank of the Philippines, Inc.

Benchmark rates have remained at the 4.25-5.25% range since the BSP fired off a series of hikes worth 175 basis points in 2018. Central bank officials said they now have time to let these rate increases work their way through the system before choosing their next move.

On the other hand, a rate cut or even a reduction in the 18% reserve requirement ratio “is already possible” this month should average inflation fall back to the 2-4% target, according to Michael L. Ricafort, economist at the Rizal Commercial Banking Corp.

The late BSP Governor Nestor A. Espenilla, Jr. vowed to continue slashing the level of bank reserves to reduce the cost of money in the local financial system. However, some officials have said they will need to see real tightness in money supply before another reserve cut is introduced.