ING Bank: Twin storms, Taal eruption likely pushed up inflation in January
MANILA, Philippines — Consumer price growth likely picked up in January fueled by higher food prices due to crop damage from the twin storms in December and a volcanic eruption last month, a global bank said.
In a commentary sent to reporters Tuesday, Nicholas Mapa, senior economist at ING Bank in Manila, said he expects January inflation to hit 2.9%.
If realized, this would be quicker than December’s 2.5%.
“January saw sustained disruption to the supply chain as run-off effects from the twin storms and damage from a January volcanic eruption, which will undoubtedly push food inflation higher,” Mapa said.
“Meanwhile, transport prices will see a slight uptick in prices on the third tranche of the fuel excise tax that was implemented, although lower global crude oil prices muted most of the impact,” he added.
In 2019, inflation averaged 2.5%, settling within the state’s 2%-4% annual target.
Since becoming central bank governor, Benjamin Diokno has given the economy a shot in the arm with a cumulative 75-basis point rate cut in 2019 and a 400-basis point reduction in bank reserves.
Diokno had said it was logical for the central bank to dial back the 175-basis point cumulative hikes fired off in 2018, which saw inflation peak at a near-decade high in September and October amid food supply bottlenecks at the time.
He added that the central bank still has some room to resume its monetary policy easing in 2020, but it won’t be as aggressive as last year.
According to ING Bank’s Mapa, the central bank will likely cut its policy rate at the Monetary Board’s meeting on February 6 “to give the economy a boost to help navigate the more challenging global growth scenario.”
“Given the bleak outlook for global growth and dissipating threats to the inflation outlook, BSP will likely keep its foot on the easing pedal to help bolster sagging growth momentum,” Mapa said.
The government will release the January 2020 inflation data on Wednesday, February 5.
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