Inflation picks up in Philippines – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assessed the latest inflation figures in Philippines.

Key Quotes

“Headline inflation jumped to 1.3% y/y in Nov (from 0.8% y/y in Oct), suggesting that consumer price inflation may have bottomed out in Oct. The reading matched our estimate but came a tad higher than Bloomberg consensus (1.2%). It was mainly driven by upward adjustment in electricity rates and actual rental for housing, as well as higher prices of some staple food (i.e. meat, fish, fruits and vegetables), alcoholic beverages and tobacco amid dissipating base effects.”

“We maintain our full-year inflation forecasts at 2.5% for 2019 (BSP’s forecast: 2.4%) and 3.0% for 2020 (BSP’s forecast: 2.9%). Main drivers of a higher inflation rate next year include a planned hike in excise duties for tobacco and alcoholic beverages, potential adverse impact from the ongoing African Swine Flu (ASF) epidemic crisis, as well as the absence of favourable base effects.”

“Given that Nov’s inflation came in line with our estimate and hit the mid-point of Bangko ng Sentral Pilipinas’ (BSP) forecast range of 0.9%-1.7%, we believe the central bank will continue to stay put at its final Monetary Policy Committee meeting of the year on 12 Dec. That said, we expect BSP to resume its rate cuts next year as the moderate inflation outlook offers room for the central bank to ease further in order to sustain domestic growth momentum. We have pencilled in a cumulative 50bps cut in overnight reverse repurchase rate to 3.50% by mid-2020.”