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Philippine CPI seen at 2-year high, but rates to stay unchanged

Monday, February 6, 2017 - 10:25

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The Philippines' annual inflation rate in January probably accelerated to 2.8 per cent, a more than two-year high, but was not expected to affect the central bank's policy decision this week, a Reuters poll showed.

[MANILA] The Philippines' annual inflation rate in January probably accelerated to 2.8 per cent, a more than two-year high, but was not expected to affect the central bank's policy decision this week, a Reuters poll showed.

Fuel and food costs may have contributed to higher inflation in January, economists said, but the forecast is still within the central bank's 2.3-3.2 per cent consumer price projection for the month.

A 2.8 per cent annual inflation rate would be the highest since November 2014 when it hit 3.7 per cent, but remains within the central bank's 2-4 per cent target this year. Inflation was 2.6 per cent in December.

All 10 economists in the same Reuters poll expected no change in the overnight borrowing rate, currently at 3 per cent, when the central bank meets on Thursday.

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But some economists remained convinced the central bank would raise interest rates this year, for the first time in more than two years, to keep inflationary pressures in check.

The Philippine economy grew faster than expected at the end of last year on robust domestic demand and infrastructure spending, and is also confronting rising fuel costs.

The central bank set the benchmark rate at 3 per cent when it moved to an interest rate corridor framework in June to make policy transmission faster and more efficient.

It has been reducing cash in the banking system to guide market interest rates towards its main policy rate through its term deposit facility, which it introduced last year.

REUTERS

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