ING Bank Manila said inflation in January likely rose to 3.4 percent from 3.3 percent a month ago, a trend that if sustained could compel the Bangko Sentral ng Pilipinas to raise interest rates as early as March.
ING Bank Manila senior economist Joey Cuyegkeng said in a report Friday he was expecting a not-so-significant effect of higher excise taxes to consumer prices for the month.
“We expect a moderate impact of higher excise taxes from the tax reform package in the first month of implementation. We forecast a 3.4-percent January inflation rate,” he said.
“Second round effects are still to be determined in March-June. Significant second-round effects could cause inflation to breach the target range of 2 percent to 4 percent,” he said.
He said an inflation report next Tuesday that was in line with Bangko Sentral’s forecast could raise inflation expectations “which may spur BSP to tighten as early as the March meeting,” he said.
Cuyegkeng said Bangko Sentral’s inflation forecast of 3.5 percent to 4 percent for January surprised markets, which was actually higher than the government’s 3.3 percent estimate for the month.
Bangko Sentral earlier said January inflation likely accelerated to as high as 4 percent from 3.3 percent a month ago, driven mainly by higher food and fuel prices.
The regulator’s Department of Economic Research said inflation could settle within the 3.5 percent to 4 percent range for the month.
“The increase in the prices of domestic petroleum product on account of higher global crude oil prices along with higher food prices due to weather-related disturbances could contribute to the rise in inflation for January 2018,” it said.
Bangko Sentral also said higher excise taxes on fuel and sugar-sweetened beverages with the implementation of the Tax Reform for Acceleration and Inclusion this month would lead to additional upward price pressures. The TRAIN law took effect in January after President Rodrigo Duterte signed it into law on Dec. 19, 2017.
