A foreign bank expects the average inflation rate in the Philippines to remain below 2 percent this year, despite the impact of the El Niño dry spell on food production.
ING Bank Manila reduced its average inflation forecast in 2016 to 1.8 percent from its previous estimate of 2 percent on expected manageable increases in consumer prices in the coming months.
ING Bank Manila senior economist Joey Cuyegkeng said in a report any price increases in food items due to El Niño would be offset by declining oil prices and lower utility rates.
“The impact of El Niño especially in the south would likely keep inflation on a steady but modest increase in the coming months. These would be offset by lower oil product prices and modest increase in utility rates,” Cuyegkeng said.
“We have revised lower our average 2016 inflation rate to 1.8 percent from the previous 2 percent,” Cuyegkeng said.
The Philippine Statistics Authority reported Tuesday that March inflation slightly picked up to 1.1 percent from 0.9 percent in February. This brought average inflation in the first three months to 1.1 percent, below the government’s official target range of 2 percent to 4 percent.
“The first-quarter average inflation rate is 1.1 percent. We are with the market in expecting a moderate increase in inflation for the rest of the year,” Cuyegkeng said.
Bangko Sentral ng Pilipinas Governor Amando Tetangco Jr. said Tuesday the monetary policy stance remained appropriate even with the slight acceleration in March inflation to 1.1 percent.
The March inflation was slower than 2.4 percent a year ago. It was also within Tetangco’s earlier forecast range of 0.6 percent to 1.4 percent for the month.
The last time the Monetary Board changed the policy setting was in September 2014, when overnight borrowing rate was increased to 4 percent and overnight lending rate was adjusted to 6 percent.
Tetangco said that latest assessment showed the manageable inflation outlook and robust growth conditions continued to support keeping monetary policy settings unchanged.
Bangko Sentral also reduced the inflation average forecast this year to 2.1 percent from an earlier estimate of 2.2 percent. Inflation rate was expected to pick up to 3.1 percent in 2017.
Inflation rate averaged 1.4 percent in 2015, lower than the target range of 2 percent to 4 percent for that year.