Inflation cools down in December
MANILA, Philippines (Updated 3, 1:58 p.m.) — Soaring prices in the Philippines cooled down for a second consecutive month in December to post the slowest rate since June 2018, the country’s statistics agency reported Friday, driven by lower food prices and transport costs during the month.
Inflation eased to 5.1 percent in December, slower than 6 percent recorded in November. The latest figure fell below market estimates and the Bangko Sentral ng Pilipinas’ 5.2-6 percent forecast range for the month.
In 2018, inflation averaged 5.2 percent, well above the government’s 2-4 percent target range and the highest level since 8.2 percent in 2008.
“The latest inflation outturn confirms further the BSP’s earlier assessment that the inflation target for 2019-2020 shall be achieved,” the Bangko Sentral ng Pilipinas said in a statement.
“The within-target inflation outlook over the policy horizon largely reflects the estimated impact of the rice tariffication law, lower global oil prices and latest monetary policy adjustments by the BSP,” it added.
Investors cheered the release of slower-than-expected inflation print, with the Philippine Stock Exchange index reversing early losses to charge back above the 7,700 level in morning trade, outperforming most regional markets.
“The slowdown of inflation in December 2018 was mainly driven by the slower annual increments in the indices of food and non-alcoholic beverages at 6.7 percent and transport at 4.0 percent,” the Philippine Statistics Authority said.
Excluding items with volatile price movements, core inflation — often used as an indicator of long-term inflation trend — decelerated to 4.7 percent in December from November’s 5.1 percent despite high demand during the Christmas shopping season.
Motoring oil prices, food supply bottlenecks, and higher excise taxes slapped on certain goods fanned inflation in 2018, which saw surging prices hit a near-decade peak in September and October before dropping for the first time in almost a year in November.
After delivering back-to-back hikes, the BSP in December kept its key rate unchanged, citing “receding price pressures.”
Stubbornly high inflation and soaring borrowing costs have weighed on consumer spending, which has traditionally been the driving force behind growth, and crimped economic expansion to a three-year low of 6.1 percent in the third quarter last year.
With inflation seen abating moving forward, some analysts said the central bank can now afford to slash lending rates in 2019.
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