DBS Bank of Singapore said inflation in November likely stayed at 3.5 percent, although risks remain such as the expected impact of the tax reform program on consumer prices.
“CPI inflation is likely to come in at 3.5 percent [year-on-year] in November, unchanged from the previous month. Risks are still tilted towards the upside going into 2018, given robust domestic demand as well as the proposed tax reforms that may be implemented starting next year,” DBS Group Research said in a report Monday.
The government is set to release the November inflation data on Dec. 5.
Finance Secretary Carlos Dominguez III earlier expressed hope that the first package of the government’s Comprehensive Tax Reform Program would be signed by President Rodrigo Duterte before the end of the year and implemented by January next year.
Inflation picked up from 3.4 percent in September to 3.5 percent in October, the fastest in almost three years, driven by higher increases in the prices of alcoholic beverages and tobacco, utilities and fuel products.
This brought the average inflation in the first 10 months to 3.1 percent, slightly higher than the midpoint of the government’s official target range of 2 percent to 4 percent this year.
The October inflation was the fastest since the 3.7 percent recorded in November 2014, confirming the earlier projection of the Finance Department that consumer prices likely peaked in October. It was
also significantly faster than 2.3 percent a year ago.
The Finance Department said in its own forecast that inflation rate in November likely decelerated to 3.2 percent, given the more stable food prices during the month.
It said the stable prices of food might offset the faster increases in the prices of fuel and power rates.
“Adequate supply of goods from higher production will further dampen inflation rise in the future. This will likewise temper the rise in interest rates despite the ongoing Fed tightening,” the agency said.