Before August inflation data, analysts see inflation within BSP forecast

MANILA, Philippines — Before inflation in August overshot government forecast that month, private sector economists polled by the central bank saw prices settling within its outlook this year.

According to the Bangko Sentral ng Pilipinas, private economists it surveyed last July saw inflation for 2018 to settle at 4.7 percent, faster than their 4.5 percent forecast in June.

For 2019, analysts see inflation slowing down to 3.9 percent from 3.5 percent in the polling last June. For 2020, the inflation outlook was unchanged to 3.8 percent.

The survey's preliminary results were included in the highlights of the Monetary Board meeting held last August 8 released to the media on Thursday.

At that meeting, BSP raised interest rates by 50 basis points to try to arrest skyrocketing inflation running at an over nine-year high. The adjustment brought BSP's total rate adjustment this year to 100 basis points.

Since then, however, new data became available, including the official inflation rate for August at 6.4 percent, which beat both government and private sector expectations.

This indicates economists may likewise hike their inflation forecasts on the next round of central bank polling. BSP Governor Nestor Espenilla Jr. himself said the BSP would revisit its own forecasts.

Before the August data was released, the central bank expected inflation to settle at 4.9 percent in 2018, before slowing down to 3.7 percent in 2019 and 3.2 percent in 2020.

The BSP has set a 2 to 4 percent inflation target until 2020.

"Upside risks also continue to dominate the inflation outlook, as the sustained increase in core inflation suggests broadening price pressures amid resilient aggregate demand conditions. Meanwhile, inflation expectations remain elevated," BSP said in the highlights of its meeting.

"The Monetary Board likewise reaffirmed its support for carefully coordinated efforts with other government agencies in implementing non-monetary measures to further mitigate the impact of supply-side factors on inflation," it added.