Philippines Feb CPI returns to target, gives cbank policy leeway

[MANILA] Philippine annual inflation returned to the central bank's 2 to 4 per cent target range in February, the statistics agency said on Tuesday, giving the central bank more leeway on the direction of interest rates when it meets later this month.

Annual inflation eased to a one-year low of 3.8 per cent in February due to slower gains in food, fuel and utility prices, and marked a return to the central bank's 2-4 per cent target for the year.

Analysts had forecast 4.0 per cent inflation for last month.

January inflation was 4.4 per cent, staying outside the central bank's target range since March last year.

With inflation back within target, ING economist Nicholas Mapa said the central bank under newly-appointed governor Benjamin Diokno could "think about easing off the brakes and look to help support the growth side of the equation."

The Philippine central bank has said inflation will return to its comfort range this year, with fuel prices expected to ease further and as the government starts to lift caps on rice imports.

Given the improving outlook on inflation, it is possible that the central bank would start unwinding some of last year's tightening, which should also bode well for economic growth, some analysts have said.

Full-year inflation projections by economists in a Reuters poll produced a median estimate of 3.3 per cent, well inside the central bank's target, and much slower than last year's 5.2 per cent average.

The central bank kept interest rates steady at its last two meetings and some economists expect policymakers to cut the rate on its overnight reverse repurchase facility and reduce banks' required reserves this year.

To tackle inflation, which rose to a near decade high of 6.7 per cent in September and October, the central bank hiked rates five times last year, totalling 175 basis points.

The central bank's next policy review is on March 21.

REUTERS