Inflation, or the rate of change in prices, could fall to its lowest yet in January when latest modeling indicate it could drop as low as 1.8 percent, based on the most optimistic forecast bared on Wednesday by Bangko Sentral ng Pilipinas (BSP) Governor Amando M. Tetangco Jr.
In a text message, Tetangco said the falling price of oil in the world market should help move inflation sharply lower in January from rates posted last December.
“The BSP’s assessment shows continued easing of price pressures. The January inflation is seen to fall within the range of 1.8 percent to 2.7 percent,” Tetangco said.
“Latest runs show domestic inflation over the policy horizon will be well within the target range,” he added.
Should inflation slow even more in January as forecast, this will be the slowest inflation for the country to date, based on BSP data dating back as early as 1998.
At this rate, inflation should fall at the low end of the target range of 2 percent to 4 percent for the month.
Inflation has decelerated since September last year, after peaking at 4.9 percent in July and in August.
The slowest was reported only last December, when inflation averaged 2.7 percent from the previous month’s 3.7 percent, on account of the falling oil prices in the international markets. Still, the central bank vowed to remain vigilant against unexpected price pressures, saying they will continue to be watchful against such threats over the policy horizon.
“BSP will watch economic and financial developments, including the balance of global liquidity, its impact on global inflation and growth dynamics and how these would translate to investor sentiment, financial market moves and domestic market inflation expectations,” Tetangco said.
The Philippine Statistics Authority (PSA) is scheduled to release the inflation data for January in the first week of February.
In a separate commentary, the continued deceleration of inflation this year as a result of lower oil prices should give the central bank sufficient policy space to keep the policy rates steady in the first half of the year, according to a research group.
A collaborative analysis of the First Metro Investments Corp.’s partnership with the University of Asia and the Pacific published as the Market Call indicates that the central bank is resuming a tightening bias in the second half of the year.
“The downtrend in the domestic liquidity and the anticipation of sharp decline in inflation reinforces our view that the BSP will take a pause in its monetary-tightening cycle at least until the second half of 2015,” collaboration analysts said.
The BSP will decide which way the policy rates will take at their rate-setting meeting on February 12.