Although commodities prices trended up in recent months, the Bangko Sentral ng Pilipinas (BSP) was seen remaining guarded on the pace of inflation over the near term, economists at a regional banking giant said.
Singapore-based DBS Bank economist Gundy Cahyadi said he does not see inflation hitting the high 3-percent ceiling forecast for the period.
Cahyadi forecasts inflation to have hit 3 percent in February. The Philippine Statistics Authority (PSA) is scheduled to release the February inflation numbers this week.
“While the current trend is clearly tilted toward the upside, we are still unlikely to see inflation hitting the ceiling of that target, barring an oil-price shock, until 2019. Which means that the central bank is unlikely to panic over inflation risks in the near term,” Cahyadi
told reporters.
Earlier, Central Bank Governor Amando M. Tetangco Jr. said current models suggest February inflation could settle within the 3.1-percent to 3.9-percent range.
This means inflation might have accelerated significantly from 2.7 percent last December, in stark contrast to the 0.9-percent rate reported in the same month last year.
Tetangco’s forecast also means inflation looks to hit above 3 percent for the first time in more than two years. Inflation last averaged more than 3 percent in November 2014 at 3.7 percent.
The acceleration, Cahyadi said, should not alarm the BSP, as inflation will likely remain below the ceiling and allow the Monetary Board time to assess the other moving parts in monetary-policy formulation, such as the normalization of US interest rates.
“It is also interesting that the central bank seems fairly comfortable with recent peso movements and has, in fact, factored in possible [further] weakening of the currency,” Cahyadi said.
In a statement following the publication of the latest US Federal Reserve (the Fed) meeting minutes, Tetangco said that, while they monitor market reaction to US developments, the BSP need not move in sync with the monetary-policy decisions of the world’s
largest economy.
“While previous comments from the central bank officials have suggested that the BSP won’t necessarily respond to any rate adjustment in the US, we reckon that a hike by the US Fed in March will embolden the BSP to kick off its own policy normalization,” Cahyadi said.