Inflation, important because it tells markets, regulators and consumers the pace at which prices rise or fall, was seen moderating further in October, based on forecasts by private economists and by the Bangko Sentral ng Pilipinas (BSP).
Particularly for the BSP, inflation averaging 4.4 percent in September was seen as slow as 3.7 percent in October and no faster than 4.6 percent, indicating even more moderate price pressures downstream and providing contrast to that period, when inflation was highest at 4.9 percent.
More moderate inflation outturn in October has practical implications for the $270-billion Southeast Asian economy looking to expand by at least 7 percent in terms of local output or the gross domestic product (GDP) this year, as the event will help the central bank extend a period of low interest charges to optimize growth.
Economists at the Manila unit of the Dutch financial services giant ING share a moderating view on inflation, saying such would likely range from 4.1 percent to 4.2 percent.
While ING Bank economists hold a tighter view on inflation in October, they acknowledged having taken broad hints from the BSP, whose policy planners forecast next year’s inflation to only 3.9 percent and 2016 inflation scaled back to only 2.8 percent from 3 percent originally.
Forecast inflation derived from a pool of economists and experts polled by Bloomberg financial newswires show similar moderating prices averaging 4.2 percent.
“Based on the downgrades of the BSP’s inflation forecast, especially for 2016 [with an inflation forecast of 2.8 percent from previous 3 percent], inflation risks are easing to the point that risks now are balanced. This brings the next concern of the BSP to the fore, which is financial stability,” ING Bank Manila senior economist Joey Cuyegkeng said.
“The risks of financial-market volatility eventually affecting the economy and inflation arise from market reaction to FOMC [Federal Open Market Committee] guidance on normalization of monetary policy. Data watch for indications of threat not only to inflation trends but also to financial stability would be the main endeavor of the BSP in the next three to six months. We expect preemptive action from the BSP as guidance from the US Fed turns more hawkish and US economic data indicate improving economy that bring along inflation pressures. In the meantime, we expect the pause of the BSP to extend to first quarter to second quarter 2015,” he quickly added.