MANILA, Philippines - Inflation eased to 3.9 percent in March from 4.1 percent in February due to slower increases in prices of housing, water, electricity, gas, and other fuels, the Philippine Statistics Authority reported yesterday.
The latest inflation figure was also slower than the 4.2 percent recorded in January and was also near the lower end of the Bangko Sentral ng Pilipinas’ forecast range of 3.7 percent to 4.6 percent for March.
Without food or oil prices, core inflation went down to 2.8 percent in March from three percent in February.
“Lower inflation for the month was due to slower annual hikes posted in select indices including in housing, water, electricity, gas and other fuels,†central bank Governor Amando M. Tetangco Jr. said in a text message.
“This is consistent with our assessment and supports our manageable inflation outlook,†he added.
Last month’s headline figure brought the first quarter average to 4.1 percent, still above the midpoint of the BSP’s three- to five-percent target range.
“(W)e will continue to be watchful of global developments – shifts in the Fed (US Federal Reserve) stance, geopolitical risks, growth prospects and financial market developments in China,†Tetangco said.
“We will also continue to monitor system domestic liquidity to ensure there are no financial stability risks building up,†he added.
By region, inflation in the National Capital Region accelerated to 2.9 percent in March from 2.8 percent in February. However, areas outside the capital saw the rate ease to 4.2 percent from 4.5 percent.
According to commodity group, the alcoholic beverages and tobacco index slid to 4.9 percent from 7.1 percent, while the housing, water, electricity, gas, and other fuels index fell to 2.7 percent from 3.6 percent.
The recreation and culture index also declined to 2.4 percent from 2.5 percent, while the restaurant index eased to two percent from 2.2 percent.
The deceleration in a number of indices offset the rise in the food and non-alcoholic drinks index to 5.8 percent from 5.5 percent.
Meanwhile, the following indices remained steady in March from the previous month: clothing and footwear (3.7 percent); furnishing (2.8 percent); health (3.3 percent); transport (one percent); communication (0.0 percent); and education (4.7 percent).
Emilio S. Neri Jr., lead economist at the Bank of the Philippine Islands, said the central bank may hold off another round of monetary tightening actions if inflation further slows down in April.
“If April inflation decelerates further from Friday’s already lower-than-expected inflation print, the monetary authorities will have a more difficult time justifying an early second quarter rate hike and would likely push back rate outright hikes in the SDA (Special Deposit Account) and RRP (Reverse Repurchase rate) to third quarter,†Neri said in a research note yesterday.
The BSP’s policy-making Monetary Board last week increased banks’ reserve requirement ratio, marking the start of a possible monetary tightening cycle. Key policy rates were kept steady, as the hike in the reserve requirement was aimed at pulling down the relatively high liquidity growth.
The Monetary Board will reassess policy settings on May 8.
“Our expectation of a soft GDP (gross domestic product) print in the first quarter could also keep the BSP from pulling the trigger on policy rates soon,†Neri said.