ING, DBS see January inflation barely moving

MANILA, Philippines – Singapore-based DBS Bank Ltd. and Dutch financial giant ING Bank expect inflation in the Philippines to have barely moved last month amid the continued fall in the price of oil in the world market.

DBS economist Gundy Cahyadi said inflation likely remained unchanged at 1.5 percent in January from 1.5 percent in December amid the continued softening of oil prices.

Cahyadi said core inflation or consumer price index (CPI) likely stood at 2.2 percent in January.

“Headline CPI inflation will be distorted by the slump in oil prices, but core inflation should remain well supported, given the strong domestic demand,” he added.

DBS Bank forecasts average inflation falling within the 2-4 percent target set by the Bangko Sentral ng Pilipinas (BSP).

“If anything, we were a little surprised by the double-digit investment growth seen last year. What seems clear to us is that inflation will be well within the target range this year,” he said.

For his part, ING Bank Manila economist Joey Cuyegkeng said inflation likely eased to 1.3 percent last month from 1.5 percent in December.

“We believe that the moderate inflation in January would be temporary and that the uptrend of inflation remained intact. El Niño is again showing its impact on food prices,” he said.

He pointed out inflation-indexed taxes on alcohol and tobacco products would continue to exert higher price pressures while expectations of rising crude oil prices heading to the end of the year would likely reverse some of the base effects.

Cuyegkeng said the average Dubai benchmark crude oil price reached $27 per barrel last month  from $51 per barrel in 2015.

“Oil price forecasts indicate a gradual increase in oil prices throughout the year as demand starts to pick up,” he added.

The BSP sees inflation averaging between 0.8 percent and 1.6 percent in January amid the minimum fare rollback for jeepneys and cheaper power rates.

BSP Governor Amando Tetangco Jr. earlier said the continued softening in oil prices helped offset the rise in rice prices and the annual adjustment in excise taxes for cigarette and liquor.

“The decline in power rates, lower domestic oil prices, and downward adjustment in the minimum jeepney fare could offset the slight uptick in rice prices as well the annual sin tax adjustments,” he said.

Inflation eased to a 20-year low of 1.4 percent last year from 4.1 percent in 2014 on the back of stable food prices and cheaper utility rates amid the continued decline in oil prices.

The BSP’s Monetary Board adjusted its inflation forecasts to 2.4 percent instead of 2.3 percent for 2016 and to 3.2 percent instead of 2.9 percent for 2017.

It is expected to release a new inflation forecast for 2016 and 2017 during its scheduled first policy-setting meeting on Feb. 11.