Inflation rises

PHILIPPINES - In Brief 06 Feb 2018 by Romeo Bernardo
The inflation rate rose to 4% in January, exceeding the 3.5% median analyst forecast for the month. Data show a full 1% increase in average January prices over the December price level, with notable increases in food prices, particularly fish and vegetables, apparently weather-related, and a range of commodities affected by a combination of higher consumption taxes, which went into effect early this year, and higher international oil prices (the price of Dubai Fateh crude oil averaged $66/bbl in January, up from $61.40 in December). The high January inflation print raises the risk that the full-year average will exceed the official 2-4% inflation target. Some analysts are forecasting an interest rate hike as soon as as Thursday this week when the Monetary Board meets for the first time this year. In our view, while an inflation rate above 4% for 2018 is very likely, we do not think a rate hike imminent. However, moving forward we expect a more hawkish tone in monetary authorities’ policy statements that will help manage inflationary expectations and guard against significant second round effects.

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