MANILA, April 5 (Reuters) - Philippine annual inflation was
3.2 percent in March, slower than market forecasts, as oil, food
and utility costs eased, reinforcing the case for the central
bank to hold its policy rate at a record low for sometime.
The consumer price index last month compares with 3.4
percent in February, and was close to the midpoint of the
central bank forecast range of 2.8 to 3.7 percent for the month.
Change in pct Mar Feb Jan Dec Nov Oct Sept
Headline (yr/yr) 3.2 3.4 3.0 2.9 2.8 3.1 3.6
Headline (mth/mth) 0.1 0.3 0.5 -0.1 0.1 -0.1 -0.1
Core (yr/yr) 3.8 3.8 3.6 3.3 3.4 3.6 3.8
Key items in March, yr-yr change:
Food, non-alcoholic beverages: up 2.8 pct (Feb up 2.9 pct)
Food alone: up 2.8 pct (Feb up 3.0 pct)
Housing/water/electricity/gas: up 2.1 pct (Feb up 2.6 pct)
Transport: up 0.5 pct (Feb up 1.0 pct)
BERNARD AW, ECONOMIST, FORECAST PTE, SINGAPORE
'The softer March CPI print was primarily due to a series of
pump price rollbacks in the month, core CPI remains on a steady
'Nonetheless, the headline figure still comes in at the
lower end of the BSP's (Bangko Sentral ng Pilipinas) 3-5 percent
medium term target range, which affirms the central bank's view
that the inflation outlook remains manageable.
'The tamer inflation outlook should allow the monetary
authorities to focus on managing liquidity, via macroeconomic
policy tools, including OMO (open market operations).'
EMILIO NERI, ECONOMIST, BANK OF THE PHILIPPINE ISLANDS,
'Combined with slowing domestic liquidity growth, today's
inflation print gives the BSP even more policy space to lower
its SDA rates further. The added flexibility will allow them to
carry out their plan of setting-up the interest corridor
mechanism, within the context of their inflation-targeting
'Further cuts in SDA rate will be necessary to ensure that
the peso does not significantly outperform other Asian
currencies during massive inflow episodes.
'The BSP will have enough flexibility to use the corridor as
it anticipates more flows now that our sovereign rating with
Fitch has exited junk status. Savings on sterilization costs
will be an added bouns for the monetary authorities.'
EUGENE LEOW, ECONOMIST, DBS, SINGAPORE
'Price pressures remain subdued in the short term and
clearly vindicates the sharp SDA rate cuts this year. However,
while there is room to further cut SDA rates as reflected low
headline inflation, BSP may adopt a wait-and-see approach and
assess the impact on credit markets before taking further
JEFF NG, ECONOMIST, STANDARD CHARTERED BANK, SINGAPORE
'With the seasonal impact fading, it is no surprise that
inflation fell on a year-on-year basis. We think that inflation
will remain low at 3.1 percent in Q2 and 3.4 percent in Q3
before rising to 4.7 percent in Q4.
'The benign outlook is aided by low food inflation
expectations....The risks of food inflation returning over the
next few months look remote.
'Given still-benign inflation outlook, the risks to the BSP
changing its policy rate in April are small. In line with recent
efforts to move to an interest rate corridor, we do not rule out
the possibility of further SDA rate cuts sooner or later.'
- The Philippine peso was quoted at 41.15 to the
dollar in early deals, flat from Thursday's close.
- The stock market was almost flat in early deals.
For more data, click on the National Statistics Office
- POLL on March inflation.................
- Interview with BSP Governor.............
- Story on Philippine Q4 GDP..............
- Story on March 14 BSP rates decision....
- Governor Amando Tetangco has said the Bangko Sentral ng
Pilipinas can keep interest rates low given benign inflation and
despite expected strong fund inflows after Fitch Ratings raised
the country's credit rating to investment grade last month.
- At its last policy meeting in March, the central bank
raised its inflation forecasts for both 2013 and 2014 to 3.3
percent from 3.0 percent and 3.2 percent, respectively.
- It has an inflation target of 3 to 5 percent this year and
next and 2 percent to 4 percent for 2015-2016.
- The central bank, which meets on April 25 to review
policy, is expected to leave its policy rate unchanged at a
record low of 3.5 percent for the fourth meeting in a row.
- It has lowered the rate it pays on special deposit account
by a total of more than 100 basis points since January, but
Tetangco has said further reductions could not be ruled out at
- The central bank also plans to release more rules as early
as this month aimed at liberalising access to foreign exchange
from banks and allow for more outflows to dampen the peso's
- Some analysts expect the central bank to keep its policy
rate unchanged until the second half of this year when it may
consider raising rates as an uptick in the economy starts to
push up consumer prices.
- The Philippine economy likely grew between 6 to 7 percent
in the first quarter from a year ago, according to Economic
Planning Secretary Arsenio Balisacan, matching the government's
target for the year, on the back of higher spending and strong
(Reporting by Karen Lema and Erik dela Cruz; Editing by Shri
Navaratnam and Rosemarie Francisco)
Keywords: PHILIPPINES ECONOMY/INFLATION
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