Slower January inflation points to steady Philippine policy rates

Envoyer par e-mail
02/05/2019 | 04:34 am
MANILA (Reuters) - Philippine inflation eased to its slowest annual pace in 10 months in January on lower food, transport and utility costs, supporting views the central bank would leave interest rates on hold for a second straight meeting on Thursday.

The consumer price index rose 4.4 percent in January from a year earlier, slightly below the 4.5 percent median forecast in a Reuters poll and was the lowest since March when the rate was 4.3 percent.

It was the third straight month that inflation has slowed. The central bank had forecast January inflation to settle within 4.3-5.1 percent.

Core inflation, which strips out volatile food and fuel items, slowed to 4.4 percent from the previous month's 4.7 percent. Consumer prices in January rose 0.2 percent from the previous month.

Cooling inflation gives the central bank "more space" to review its monetary policy, Bangko Sentral ng Pilipinas Deputy Governor Diwa Guinigundo said.

The central bank is "ready to change course when warranted", Guinigundo said.

The central bank paused its tightening cycle in December to allow its five straight previous rate hikes, totalling 175 basis points, to work their way into the economy.

With inflation likely to become less of a worry this year, some economists believe the central bank could ease monetary policy by reducing banks' required reserves and cutting interest rates to support growth.

Inflation is expected to continue to moderate this year and eventually return within the central bank's 2-4 percent target for 2019 as the impact of new and higher taxes slapped on certain commodities last year fades.

Easing oil prices and with the cost of rice, the national staple, seen falling further this year once a bill removing the cap on rice imports and replacing it with tariffs is signed into law, should also help keep inflation under control.

All 10 economists in a Reuters poll expect the central bank to keep the rate on its reverse repurchase facility steady at 4.75 percent when it meets for the first time this year to review policy on Feb. 7.

The Philippine economy's less-stellar fourth quarter performance would also argue for interest rates to be left on hold, economists have said.

The economy grew 6.1 percent in the last three months of last year, slightly faster than the previous quarter's 6.0 percent, but less than what the market had expected.

(Reporting by Karen Lema and Neil Jerome Morales; Editing by Gopakumar Warrier)

By Karen Lema and Neil Jerome Morales

Thomson Reuters 2019
Envoyer par e-mail