Economists at some of the biggest banks in the country project inflation moving down in the months ahead, averaging sharply lower to only 3.6 percent this year instead of 4 percent as projected earlier, the Bangko Sentral ng Pilipinas (BSP) said on Monday.
Economists in academe and the private sector also anticipate significantly lower inflation expectations when the rate at which prices change was seen similarly moderating to only 3.7 percent next year, from 3.9 percent originally.
The BSP established the moderating outlook on inflation going forward in a survey conducted on 27 economists. The outcome of this regular exercise in data gathering helps the policy-making monetary board to craft appropriate policy responses to the ever-changing domestic economic landscape.
“Primary results of the BSP’s survey of private sector economists for December 2014 yielded lower mean inflation forecasts for 2015 to 2016 relative to the results in September 2014,” the BSP said in its year-end inflation report.
In particular, the mean inflation forecast of 27 economists the central bank polled declined to 3.6 percent for 2015 from an earlier forecast of 4 percent.
Similarly, private economists said inflation is poised to hit 3.7 percent in 2016, down from an earlier forecast of 3.9 percent.
“The analysts attributed their lower inflation expectations mainly to the softening of international oil prices,” the central bank said.
The economists’ forecasts for both years are well within the government’s scaled back target for the next two years from 2 percent to 4 percent.
Likewise, the BSP said based on the probability distribution of the forecasts provided by the respondents, there was a 58.1 percent change that the average inflation for 2015 will settle within the 3-percent to 4-percent range.
Meanwhile, there remains a 26.9-percent probability that average inflation for 2015 will exceed the target range and fall within the 4-percent to 5-percent range this year. In other words, the likelihood for inflation to go out of hand is sharply diminished.
The BSP governor and other BSP senior officials earlier said the sharp decline in oil prices caused inflation to decelerate in the final months of 2014.
Officials also earlier said should the decline in oil prices persist, projected inflation could move further down the lower band of the target this year. The BSP, however, warned of the possible negative effects once there is a steep reversal of the decline in oil prices in the country.