Inflation picks up to 2% in September – DBS

MANILA, Philippines - DBS Bank of Singapore said it expects inflation finally touching the lower end of the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP) in September.

Gundy Cahyadi, economist at DBS, said September inflation was seen at two percent after easing to 1.8 percent in August from 1.9 percent in July.

He pointed out core inflation may have bottomed out in the second quarter of the year as it was expected to come in at 2.1 percent in September.

“Not only has underlying demand remained strong, but price expectations also seem to have inched up in recent months alongside the rise in food prices,” Cahyadi said.

He pointed out food inflation is currently trending around three percent and continues to offset some of the drag prevalent in the housing or utilities and transport components of the consumer price index.

He added inflation would continue to pick up until next year.

“Given that the distortion from low oil prices is likely to dissipate going into 2017, CPI inflation should average 2.6 percent next year, up from a projected 1.6 percent this year,” he said.

According to Cahyadi, core inflation is expected to be steady within the 2.5 to three percent range by mid-year.

BSP Governor Amando Tetangco Jr. said inflation last month likely ranged between 1.6 and 2.4 percent amid the prize freeze on basic commodities after President Duterte declared a “state of lawless violence.”

Authorities also observed lower power rates in areas serviced by Manila Electric Co. as well as lower domestic diesel and kerosene prices this month.

Tetangco said a slight price uptick in rice and higher domestic LPG prices were noted along with the weaker peso.

The BSP’s Monetary Board earlier lowered its inflation forecast to 1.7 percent from 1.8 percent this year but retained the 2.9 percent target for 2017 and 2.6 percent for 2018.