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Easing inflation gives Philippine central bank scope to keep rates low

Easing inflation gives Philippine central bank scope to keep rates low

FILE PHOTO: Vendors and customers wearing face masks for protection against the coronavirus disease (COVID-19) are seen inside a public market in Quezon City, Metro Manila, Philippines, February 5, 2021. REUTERS/Eloisa Lopez

MANILA :Philippine inflation eased in September from a near three-year peak in the previous month, giving the central bank some room to maintain its policy support to ensure a sustained recovery for the economy.

The Consumer Price Index rose 4.8per cent from a year earlier, but slowed from 4.9per cent in August, mainly due to a slowdown in the transport index, government data showed on Tuesday.

The headline figure was at the low end of the central bank's projected range of 4.8per cent-5.6per cent for the month, and below the 5.1per cent median forecast in a Reuters poll.

Core inflation, which excludes volatile food and fuel prices, remained at 3.3per cent.

Inflation averaged 4.5per cent in January-September, well above the year's 2per cent-4per cent target band.

The Bangko Sentral ng Pilipinas (BSP) said inflation could remain elevated before decelerating to within the target by end-2021, and would settle close to the midpoint of the same target in 2022 and 2023.

In a statement, BSP Governor Benjamin Diokno reiterated the central bank's resolve "to maintain its accommodative monetary policy stance for as long as the extent that the inflation outlook would allow".

The BSP has kept its key interest rate at a record low for the past seven consecutive policy meetings, saying monetary settings remained appropriate given manageable inflation and uncertain growth outlook.

"Cost-side pressures remain but the lower-than-expected inflation rate gives the Bangko Sentral some breathing space to keep rates untouched for a little longer," said ING economist Nicholas Mapa.

The path to full recovery for Philippine economy, which came out of a pandemic-driven recession in the second quarter, remains unclear, with the recent reimposition of strict quarantine protocols prompting the government to lower its 2021 growth target.

Some economists believe the BSP will keep interest rates steady beyond 2021, but an elevated inflation has dimmed the prospect of further easing.

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Muralikumar Anantharaman and Rashmi Aich)

Source: Reuters


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