Inflation now within target

PHILIPPINES - In Brief 05 Mar 2019 by Romeo Bernardo
As we had expected, inflation fell from 4.4% in January to 3.8% in February, within the BSP’s 2-4% target. The month-on-month inflation rate was steady at 0.2, mainly reflecting the impact of higher oil fuel prices, including the contribution of higher excise taxes on oil. Food prices meanwhile continued to fall on a monthly basis. Barring unforeseen shocks, we expect the headline inflation rate to remain on a downward slide through 4Q19, with the annual average likely to fall below 3%. We are told that economic managers are at work to ensure that the Implementing Rules and Regulations of the Rice Tariffication Act lead to freer rice trade. Current forecast of a weak El Nino in the March to May period also suggests limited impact on food prices. Despite market talk of a more dovish BSP under the newly-appointed Governor Benjamin Diokno, we are not expecting the Monetary Board to adjust policy rates when it meets later this month.TABLE 1.Major Sources of Inflation in February 2019**2012=100Note: Some figures may not exactly add up due to rounding Source: Philippine Statistics Authority (PSA)

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