Pick-up in Philippines February inflation expected

MANILA: Inflation likely quickened in February on the back of more expensive food items and utility costs, although the price growth last month likely stayed within target.

An Inquirer poll of six economists yielded a mean inflation forecast of 3.1% which, if realised, would be faster than the 2.8% recorded in January.

But the median projection settled within the forecast of Bangko Sentral ng Pilipinas (BSP) that pegged last month’s inflation at between 2.8% and 3.6%.

Overall, both forecasts from the Inquirer poll and the BSP showed inflation staying within the state’s 2% to 4% target range for the third straight month.

“Food prices and energy costs have remained high,” said Leonardo Lanzona, economist at Ateneo de Manila University.

“Despite the BSP interest policy, the government has hardly made any dent on the supply side, which continues to impose an upward pressure on prices.

“The financial consolidation issues had limited any form of government programme that can increase productivity,” added Lanzona, who projected February inflation at 3.1%.

For Ma. Ella Oplas, economist at De La Salle University, there were indications of brisker economic activity in February that likely fuelled demand for key consumer items.

“We saw an increase (although minimal) in agriculture production, which means people in the sector earned (and) therefore can be translated again (to an) increase in demand,” Oplas said.

She projected February inflation to have settled at between 3% and 3.5%.

At its meeting last month, the Monetary Board left its benchmark rate unchanged at 6.5%, the highest in more than 16 years, in what the BSP called a “prudent” move amid persistent risks to the inflation outlook.

What’s worrying the BSP at the moment are higher transport charges and electricity rates, as well as costlier oil and domestic food prices.

The central bank is also wary of the additional impact on food prices of a strong El Nino episode.

For this year, the BSP said inflation would ease in the first quarter before potentially soaring above the target anew in the second quarter as favourable base effects fade. — Philippine Daily Inquirer/ANN