​Inflation drops to 3.3%

PHILIPPINES - In Brief 05 Apr 2019 by Romeo Bernardo

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Inflation continued to fall sharply to 3.3% in March from 3.8% in February and 4.4% in January. The latest inflation print is below the 3.5% market consensus. The overall price level was unchanged from last month, with declines in the prices of key food commodities such as fish, vegetables, and rice offset by increases in fuel-related costs. Local pump prices went up by 6% last month from its February level. March inflation brings the 1Q19 average, at 3.8%, within the BSP’s 2-4% target range. We think inflation will continue to slide in the quarters ahead with the full-year inflation forecast to average 2.8%. Ahead, upside risks include continuing high oil prices internationally and possible weather related disruption in food supplies. These however may be countered by rice prices, expected to soften further following the signing today of the Implementing Rules and Regulations (IRR) of the rice tariffication law that will allow freer rice importation. The latest inflation print raises the likelihood of an interest rate cut this year, possibly as early as May. Monetary authorities have said that a reduction in the reserve requirement ratio (RRR) is always on the table and is a timing issue.table 1.Major Sources of Inflation in March 2019**2012=100Note: Some figures may not exactly add up due to roundingSource: Philippine Statistics Authority (PSA)