Poll: RP Dec inflation at 8.8%, rate cuts likely
Reuters | 01/05/2009 9:33 AM
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Philippine inflation likely slowed to an eight-month low in December as tumbling oil prices offset brisk spending related to the Christmas holidays, opening room for more interest rate cuts in early 2009, according to a Reuters poll.
Analysts said the central bank may follow through its December half percentage point rate cut -- the first time it joined a global round of rate easing -- with another 50 basis point reduction in the first quarter as oil prices continue to fall.
The median forecast of 11 economists showed consumer prices in December likely climbed 8.8 percent from a year earlier, the slowest since April's 8.3 percent, as declining fuel prices tempered seasonal spikes in commodity costs.
The forecast was near the low end of the central bank's estimate of an 8.6-9.5 percent annual inflation rate in December.
If the forecast holds, the average inflation rate for 2008 would be 9.4 percent, the highest since 1994 when the average rate was at 10.5 percent and near the low end of the central bank's forecast for the year of 9 to 11 percent.
"I think it's a combination of falling fuel prices and the transport cost being brought down. And it's largely in line with the general trend of disinflation across Asia," said Christy Tan, currency strategist at Bank of America in Singapore.
"There is room for more monetary easing. The central bank has just taken the first step," she said, adding that she expected policy rates to be lowered further by a total of 50 basis points in the first two months of 2009.
Other analysts said the central bank would seek to support growth through more rate cuts as global demand weakened and with commodity prices likely to drop further.
Growth in the Philippine economy is expected to have slowed sharply to about 4.6 percent in 2008 from a 31-year high of 7.2 percent in 2007, the government earlier said. Growth is likely to stay sluggish, at 3.7 to 4.7 percent, in 2009.
But central bank governor Amando Tetangco told Reuters in an interview last month authorities would be cautious on any easing as average inflation in 2009 would likely stay above the official target of 2.5 to 4.5 percent.
Inflation would ease to within the central bank target of 3.5 to 5.5 percent in 2010, he said.
Forecasts for Philippine December CPI (year on year):
Action Economics 8.8 percent
Bank of America 7.8 percent
Banco de Oro Unibank 9.0 percent
CIMB-GK Research 9.0 percent
Forecast PTe 8.4 percent
HSBC 8.4 percent
IDEAglobal 8.9 percent
ING Bank 9.1 percent
Informa Global 8.9 percent
Standard Chartered 8.1 percent
UBS 8.3 percent
