BANGKO Sentral ng Pilipinas Governor Amando Tetangco Jr. said inflation is expected to be within the target range this year and next after dropping below the government’s official forecast of 2 percent to 4 percent in 2015.
Tetangco made the projection in a letter sent to President Benigno Aquino III, explaining why the 2015 average inflation of 1.4 percent was lower than the government’s target range of 2 to 4 percent.
“The latest baseline forecasts of the BSP indicate that inflation is likely to rise gradually and is expected to be within target in 2016 and 2017,” he said.
“Inflation gained some momentum near the end of 2015, as the impact of recent typhoons led to increases in the prices of key food items, notably vegetables, fruits, meat, and fish. Inflation is also seen to be higher in 2016-2017 given the low 2015 base,” he said.
He said improved demand from recovering economies could spark a rally in international oil prices this year. He said potential upside risks to the outlook were linked mainly to the impact of El Niño conditions and recent weather disturbances on food prices and utility rates as well as pending petitions for power rate adjustments.
Downside risks, meanwhile, could come from slower-than-expected global economic activity.
“We would like to assure the President and the Filipino people that the BSP is closely monitoring these developments that could pose risks to the inflation outlook. This is to ensure that monetary policy remains consistent with the economy’s momentum for sustained non-inflationary growth,” he said.
Bangko Sentral is required to explain to Malacañang whenever inflation misses the official target set by the government.
Headline inflation in January, meanwhile, will likely increase to 1.6 percent or 0.1 percentage point higher than the December inflation, analysts said over the weekend. Julito G. Rada, Gabrielle H. Binaday
Analysts and economists polled by The Standard said January inflation would likely ease to as low as 1.1 percent or picked up slightly to 1.6 percent on lower oil prices and transportation fares.
Standard Chartered economist Jeff Ng said inflation would grew faster at 1.6 percent in January.
“We expect inflation at 1.6 percent year-on-year. Still benign and slowly trending up,” Ng said in an e-mail.
ING bank economist Joey Cuyegkeng, meanwhiole, said inflation would likely ease to 1.1 percent from the 1.5 percent in December 2015 and 2.4 percent in January 2015.
He said inflation in January would likely be moderate than December due to lower retail prices of oil products, and reduced power rates, vegetable prices and jeepney fares.
“We believe that the January moderation of inflation would be temporary and that the overall trend is still higher,” Cuyegkeng added.
ANZ Research economist Eugenia Victorino expects inflation to ease also to 1.2 percent following the slump in oil prices in the global market.