ING Bank Manila said it expects inflation in August to remain manageable near the midpoint of the government’s target range of 2 percent to 4 percent.
ING Bank Manila senior economist Joey Cuyegkeng said in a report that offsetting pressures implied not only a stable inflation environment but also a manageable rate.
“August inflation is generally expected to remain stable at the mid-point of BSP’s inflation target range. The consensus forecast for August inflation is 3 percent, slightly higher than our forecast which is steady at July’s 2.9-percent inflation rate,” Cuyegkeng said.
He said good agriculture production together with the avian flu impact on chicken prices counteracted pressure from higher fuel prices and firmer prices of other meat products. He said the impact on the
poultry industry was contained, but fears of the avian flu virus cut overall consumption and depressed chicken prices.
Inflation in July slightly picked up to 2.8 percent from the revised 2.7 percent a month ago, on higher increases in water and electricity rates and fuel prices. This brought inflation in the first seven months to 3.1 percent, slightly higher than the midpoint of the target range.
Cuyegkeng expressed optimism that inflation would average 3.1 percent this year, but said tax-reform related price pressures would likely see inflation hit 3.5 percent in 2018.
“The tax-related impacts include demand pull pressures from higher disposable incomes as well as higher excise taxes for certain products including petroleum products and sweetened beverages. Strong domestic demand and rising imbalances could lead to overheating. We expect policy settings to remain steady until the December policy meeting when we expect a 25bp rate hike,” he said.
The Bangko Sentral ng Pilipinas said inflation in August likely settled between 2.6 percent and 3.4 percent as increases in domestic petroleum prices, electricity rates and rice prices along with the weaker peso could contribute to upward price pressures for the month.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said the July inflation confirmed the regulator’s assessment of a continuing benign inflation conditions prevailing in the country.
Socioeconomic Planning Secretary Ernesto Pernia said the July inflation was lower than the market expectations of 3 percent and well within the government’s target.
He said as the Philippines entered the lean months for rice production, it was important for the government to ensure adequate supply of rice to prevent inflationary pressures.