Philippine inflation seen steady in December, but pressure seen building

[MANILA] Philippine consumer prices increased in December at the same annual pace as the previous month, a Reuters poll found, holding the year's average within the 2-4 per cent target range.

Headline inflation in December was 3.3 per cent, the median forecast of nine economists showed, the midpoint of the central bank's projected range of 2.9 to 3.6 per cent for the month. It brought the average rate for the whole year to 3.2 per cent.

A stronger peso, which extended its late-2017 rally to hit a six-month high against the US dollar on Wednesday, likely helped offset the impact of holiday spending and higher fuel prices, economists said.

Although the central bank is confident that inflation will remain well-behaved this year, economists said price pressures were building up, with some expecting policy action possibly in the near term.

Others, however, said the central bank would not act immediately but was likely to flag its tightening bias in the coming weeks, especially with tax reforms taking effect this month that would push up prices of certain commodities, including fuel.

The central bank, which holds its next policy meeting on Feb 8, expects average inflation this year to hit 3.4 per cent, taking into account the "transitory" effects of tax hikes.

The country's policy settings have remained steady since the central bank raised rates by 25 basis points in September 2014, as inflation has been within its comfort zone despite robust economic growth.

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