Philippine Inflation Falls Further Than Any Economist Expected

A residential area with informal settler area (C) is pictured amongst condominium and commercial development projects in suburban Manila. (Photo: TED ALJIBE/AFP/Getty Images)

By Claire Jiao, Cecilia Yap and Andreo Calonzo

Philippine inflation was weaker than all analysts expected in December as food and transport prices dropped.

Consumer prices rose 5.1 percent, easing growth for the second straight month and the slowest increase since May, the Philippine Statistics Authority said in a briefing. The median forecast in a Bloomberg survey was 5.6 percent.

Monetary authorities have fought to rein in prices with five successive interest rate hikes last year totaling 175 basis points. For the whole of 2018, inflation averaged 5.2 percent – still above the central bank’s 2 percent to 4 percent target for the year.

(Source: Bloomberg)

With import restrictions on rice, the country’s staple grain, set to be eased and world oil prices falling, “the stars are aligning for decelerating inflation,” said Nicholas Mapa, senior economist at ING Bank NV in Manila.

The central bank could embark on a “two-pronged easing cycle” this year to help support slowing economic growth, Mapa said. ING expects Bangko Sentral ng Pilipinas to cut the policy rate as early as May and slash reserve requirements by as much as 200 basis points throughout the year.

On Leave

Prior to Friday’s inflation report, the central bank said that Governor Nestor Espenilla would take two weeks of medical leave through Jan. 21 to seek treatment abroad.

The 60-year old governor, who was diagnosed with early-stage tongue cancer in 2017, previously said he might take time off intermittently after medical leave in September and October last year. Deputy Governors Diwa Guinigundo and Maria Almasara Cyd Tuaño-Amador will stand in while he’s away.

 

© 2019 Bloomberg L.P