THE Bangko Sentral ng Pilipinas said the inflation rate in December likely eased to as low as 5.2 percent from 6 percent in November, pulled down mainly by lower prices of rice and petroleum products.
The BSP’s Department of Economic Research said in a statement Friday it saw the December inflation settling within the 5.2-percent to 6-percent range.
“The sustained slowdown of inflation during the month is seen to be driven mainly by the continued decline in petroleum and rice prices, the rollback in minimum jeepney fare, and the slight appreciation of the peso,” it said.
However, these factors could be offset in part by higher electricity rates in the franchise areas of Manila Electric Co.
“Moving forward, the BSP will continue to closely monitor evolving price trends and domestic demand condition to help ensure that the inflation target is achieved,” it said.
Inflation in November eased to 6 percent from a nine-year high of 6.7 percent in October due to the decline in food and oil prices.
As a result, the Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, during the last meeting for the year on Dec. 13, decided to keep the policy interest rates steady at 4.75 percent after five successive hikes since May, taking into account the decelerating inflation rate.
The interest rates on the overnight lending as well as deposit facilities were likewise kept unchanged.
The board reduced the inflation forecast for 2018 to 5.2 percent from 5.3 percent, 3.18 percent from 3.5 percent for 2019, and 3.04 percent from 3.3 percent for 2020.
The board said inflation expectations had steadied given the decline in international crude oil prices and the stabilization of the peso.
It said the risks to the inflation outlook had become more evenly balanced for 2019 and leaned toward the downside for 2020 amid a more uncertain global economic environment, which could further mitigate upward pressures from commodity prices in the coming months.
Despite the latest move of keeping the benchmark interest rates, the board said the board remains vigilant against the latest developments and ready to take further action as appropriate to safeguard its price stability mandate.
The board has raised a total of 175 basis points in policy rate since May this year in a bid to rein in inflation.
Earlier, ING Bank Manila senior economist Nicholas Mapa said the Bangko Sentral might opt to cut interest rates by the second quarter next year if inflation continued to decelerate in the coming months.
Mapa said with the 2018 inflation also driven largely by supply side pressures, headline inflation could be expected to follow a sharp decline similar to that of 2008.
He said food supply bottlenecks were being addressed by the government and oil prices were declining.
“Should headline inflation continue to slide in coming months, growth slow to sub-6 percent levels in coming quarters and the Fed adopts a more dovish stance, then the likelihood that the BSP reverses its stance to easing by the second quarter of 2019 will have increased,” Mapa said.