Inflation, or the rate of change in prices, trended lower from its peak of 5.3 percent in October to just 4.7 percent last month. The BSP expects inflation to remain manageable during the Christmas holidays despite the impact of Typhoon Sendong and the tradition of spending and merrymaking during the month.
A price freeze had been imposed in calamity-stricken areas and the impact of the devastation on the prices of goods and commodities has yet to be assessed.
BSP Governor Amando Tetangco Jr. said in a text message on Wednesday that for purposes of monetary- policy crafting, the central bank still uses the consumer price index (CPI) based on 2000 prices rather on the 2006 series put in place earlier by the National Statistics Office.
He said inflation forecasts based on 2006 prices were to start only after the BSP shall have completed a re-estimation of models using the historical CPI series provided by the NSO.
With inflation ranging only from 4 percent up to 4.9 percent in December, the full-year forecast was seen to average no higher than 4.52 percent, only slightly higher from an earlier forecast of 4.46 percent.
“The outlook for inflation remains manageable as we continue to see within-target inflation over the policy horizon. Nevertheless, the BSP remains watchful of global developments to ensure that our policy settings remain appropriate,” Tetangco said.
He earlier acknowledged the “need to support growth” given the developments in the US and the euro zone which have led to a slowdown in global economic growth,
Economists and local experts took Tetangco’s statement as a hint of an upcoming monetary-policy easing early next year since lower domestic interest rates help boost economic activities.
The country’s economic growth slowed in the first nine months owing to a sharp fall in exports and aggravated by cautious government spending.
The expected slowdown has forced the International Monetary Fund to also lower its forecast growth for the Philippines this year to only 4.2 percent instead of the original 4.9 percent.
But because inflation pressures have moderated at the same time, Tetangco, who heads the seven-man policy-making monetary board of the BSP, has repeatedly hinted of an adjustment in monetary- policy settings to optimize growth.
Both foreign and locally based economists, such as those from HSBC and First Metro Investments Corp., anticipate a cut in the rate at which the BSP borrows from or lends to banks by at least 25 basis points.
This means a reduction in the so-called policy rates of the BSP to at least 4.25 percent from 4.5 percent for borrowing and to 6.25 percent from 6.5 percent for lending.
