Feb inflation eases, gives BSP room to hold rates

Posted at 03/05/14 10:03 AM


MANILA (UPDATE) - Inflation in the Philippines unexpectedly slowed for the first time in six months in February, giving the central bank room to keep interest rates at a record low at its policy meeting this month.

The consumer price index rose 4.1 percent in February from a year earlier, easing from a 4.2 percent annual increase in the prior month on slower tobacco and beverage price rises, the statistics agency said. The rate was near the lower end of the central bank's 3.8 to 4.6 percent forecast for February.

Only two out of 11 economists in a Reuters poll had expected inflation to ease in February. Economists' forecasts ranged between 4.0 and 4.5 percent.

Bangko Sentral ng Pilipinas Governor Amando Tetangco said the slightly slower pace of consumer price increase in February would help keep the average inflation rate within its 3 to 5 percent target range for 2014.

"We will make adjustments to policy levers as appropriate to ensure that liquidity continues to be channeled to productive sectors of the economy, and that inflation expectations remain well-anchored," Tetangco said in a mobile text message to reporters.

Consumer prices crept up in the later part of 2013 due to weather-related supply shocks, but policymakers have said they do not expect the impact of the disasters on consumer prices to persist.

The central bank last month lowered its inflation estimate for this year to 4.3 percent from a previous estimate of 4.5 percent, but slightly raised its forecast for average 2015 inflation to 3.3 percent from 3.24 percent.

The central bank next meets on March 27 to review policy. It kept its benchmark interest rate steady at a record low of 3.5 percent last month, but analysts expect the central bank to start raising rates in the second half of this year to curb price pressures.

"Domestic price pressures remain in food and energy, especially with recent uptrends in international food and crude oil prices," said Jeff Ng, an economist at Standard Chartered Bank in Singapore.

"We expect BSP to keep rates unchanged in the first half as inflation remains manageable and hike in the second half," Ng said.

The consensus from a Reuters quarterly poll in January was for the central bank to start raising rates in the third quarter.