THE increase in consumer prices will still fall below the central bank’s target range for the year, even if markets expect an uptrend of inflation toward the second half of 2016, the economist of an international banking giant said.
In a recent commentary on Philippine inflation, Singapore-based DBS Bank economist Gundy Cahyadi said inflation likely returned to target range at 2.2 percent in July this year.
Cahyadi’s forecast is within the expected range for July inflation given by Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr. recently, at 1.5 percent to 2.4 percent.
Monthly inflation has been missing the target range since May last year, causing the central bank to break its streak of a within-target-inflation average for six consecutive years; 2015 inflation averaged at 1.4 percent, below the government’s target of 2 percent to 4 percent.
Inflation in June pushed the average to 1.3 percent in the first half of the year, still below target.
This means that for inflation to graze the lower end of the government’s 2-percent to 4-percent target range for the year, the average inflation for the second half of the year must be around 2.7 percent.
Central bank officials earlier expressed optimism that inflation will return to within target on average for the year as expectations on higher inflation, from June to December this year, rise.
But the Singapore-based economist still sees inflation falling below the government’s target range for the year, which means inflation would miss its target for the second year in a row.
“Inflation is set to continue ticking higher toward the year-end, partly due to the low base effects, as well as pressure from food prices. Still, average CPI [consumer price index] for the year is likely to be manageable, just below 2 percent,” Cahyadi said. “The BSP is unlikely to react too much to this data alone,” referring to potential policy actions from inflation developments.
The Philippine Statistics Authority (PSA) is expected to release the inflation print of the country for July in the first week of August.
The central bank, meanwhile, is to hold its monetary policy meeting on August 11. This will be the central bank’s fifth meeting to set monetary policy for the year.