<\/a><\/p>\nThis would mark the lowest monthly figure in four months, or since the 2.3% noted in October.<\/p>\n
The Philippine Statistics Authority is set to reveal February inflation data on Wednesday (March 5).<\/p>\n
\u201cFactors contributing to price increases this month include elevated electricity rates and oil prices, along with rising costs of crucial agricultural products like fish and meat,\u201d the BSP stated in its announcement.<\/p>\n
However, these price pressures were likely counteracted<\/span> by reduced prices of rice, fruits, and vegetables along with adverse base effects, it added.<\/p>\n\u201cLower gasoline and diesel prices, a weaker US dollar, and declining electricity and rice prices will help balance out general food price increases compared to a year earlier,\u201d remarked Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank).<\/p>\n
According to analysts, the decrease in rice prices likely contributed to the drop in CPI this month.<\/p>\n
\u201cOur February inflation prediction stands at 2.6% due to decreasing rice prices as a result of increased supply in the market following the declaration of a food security emergency,\u201d commented Reinielle Matt M. Erece, economist at Oikonomia Advisory and Research, Inc.<\/span><\/p>\nLast month, the Department of Agriculture (DA) declared a food security emergency concerning rice, allowing the National Food Authority (NFA) to distribute buffer stocks at subsidized rates. Local government units can procure NFA rice at P33 per kilo and sell it to consumers at P35 per kilo.<\/span><\/p>\nOn Feb. 15, the DA also reduced the maximum suggested retail price (MSRP) of 5% broken imported rice <\/span>to P52 per kilo from <\/span>P55 previously. This price was further lowered to P49 per kilo as of March 1.<\/p>\n\u201cThe primary contributor to the slowdown was most likely rice. Not only were there favorable base effects on rice, but rice prices also declined on a month-to-month basis,\u201d noted Aris D. Dacanay, economist for ASEAN at HSBC Global Research.<\/p>\n
Chinabank Research stated that the reduction in inflation in February was chiefly driven by lower prices of rice and vegetables.<\/p>\n
Meanwhile, Mr. Dacanay observed that retail fuel prices began to ease in February amidst a decline in global prices.<\/p>\n
In February, pump price alterations recorded a net decrease of P0.05 a liter for diesel and P0.90 a liter for kerosene. However, gasoline saw a net rise of P2.1 a liter.<\/p>\n
\u201cMoreover, world oil prices are on a downward trajectory, and while a slight uptick in domestic energy prices is noted, we anticipate overall price stabilization,\u201d added Mr. Erece.<\/p>\n
Additionally, ANZ Research indicated that inflation in utilities and transport likely softened year-on-year in February due to favorable base effects.<\/p>\n
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco also remarked on a “softening in inflation in housing and utilities, transportation, and accommodations and dining services.\u201d<\/p>\n
Analysts suggested that the strengthened peso during the month could also help mitigate inflation.<\/p>\n
\u201cThe peso exchange rate has appreciated against the US dollar thus far in February compared to recent months, making it the strongest for the peso in nearly two months,\u201d stated Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort.<\/span><\/p>\n\u201cThis could assist in easing import costs and overall inflation,\u201d he added.<\/p>\n
The peso concluded at P57.995 against the dollar at the end of February, appreciating by 37 centavos from its P58.365 per dollar finish at the end of January.<\/p>\n
\u201cDue to the relatively stable prices of consumer goods combined with the strong performance of the peso against the dollar, inflation for February is anticipated to decrease,\u201d commented Emmanuel J. Lopez, a professorial lecturer at the University of Santo Tomas Graduate School.<\/p>\n
INFLATIONARY PRESSURES
\n<\/b>Conversely, analysts identified factors such as high electricity rates as potential drivers of February inflation.<\/p>\n
\u201cSlightly increased electricity prices also counterbalance the decrease in crude oil prices,\u201d stated Citi Economist for the Philippines Nalin Chutchotitham.<\/p>\n
Manila Electric Co. (Meralco) raised the overall rate by P0.2834 per kilowatt-hour (kWh) to P12.0262 per kWh in February from P11.7428 per kWh in January.<\/span><\/p>\n\u201cFactors driving inflation in February include price hikes in electricity and local petroleum products, as well as elevated prices of select food items like meat, fish, fruits, and vegetables,\u201d noted Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco.<\/span><\/p>\nWith the exception of rice, other staple food items could possibly fuel inflation during the month.<\/p>\n
\u201cPrice pressures will manifest in the food and utilities segments,\u201d remarked Moody\u2019s Analytics economist Sarah Tan.<\/p>\n
\u201cImportantly, onion prices surged in February \u2014 up to 70% higher than the previous month. This increase has prompted officials to inspect onion storage facilities to ensure <\/span>that supply is not being withheld from the market amidst the current <\/span>harvest season,\u201d she added.<\/span><\/p>\nData from the Agriculture department indicate that the retail price of local red onion averaged P174.01 per <\/span>kilogram as of end-February.<\/span><\/p>\n\u201cHowever, significant price pressures were observed in food items other than rice. Prices of cabbages, bitter melons, onions, and eggplants increased within the 30-50% range year on year due to tight supply conditions stemming from previous typhoons,\u201d stated Mr. Dacanay.<\/p>\n
In the upcoming months, headline inflation is anticipated to remain within the 2-4% target range.<\/span><\/p>\n\u201cOverall, the inflation outlook remains favorable with food inflation expected to diminish in the near to medium term,\u201d according to ANZ Research.<\/span><\/p>\nThe BSP projects inflation to average 3.5% this year, factoring in potential risks.<\/p>\n
The positive inflation outlook should encourage the central bank to continue its easing strategy, analysts suggested.<\/p>\n
\u201cWe believe that overall inflation staying beneath the midpoint of the official 2-4% target will enable the BSP to reduce rates by 25 basis points (bps) at its upcoming policy meeting in April,\u201d stated ANZ.<\/p>\n
Ms. Tan remarked that the next rate cut could occur as early as April \u201cassuming inflation consistently remains near the midpoint of the target range and the peso stabilizes.\u201d<\/span><\/p>\nThe Monetary Board\u2019s next rate-setting assembly is planned for April 3.<\/p>\n
\u201cFrom my perspective, I believe the BSP will recommence rate reductions in April, as we are now aware of the current trends.<\/span><\/p>\n\u201cBSP was set to implement a decrease this month, but an unexpected rise in policy uncertainty resulted in the postponement,\u201d stated Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp.<\/span><\/p>\n
Weak economic performance will also provide the central bank room to persist with its easing measures.<\/p>\n
\u201cAssuming inflation expectations remain low and stable, we believe that the MB (Monetary Board) has the capacity to lower the policy rate to bolster GDP (gross domestic product) growth and in response to the recent RRR (reserve requirement ratio) reduction,\u201d remarked Mr. Asuncion.<\/p>\n
Last month, the BSP revealed it will decrease the RRR for universal and commercial banks as well as nonbank financial entities with quasi-banking functions by 200 basis points to 5% from 7%, effective March 28.<\/p>\n
\u201cA consistent inflation rate coupled with slowing GDP growth serves as an indication for the central bank to implement a rate cut during their upcoming meeting,\u201d noted Mr. Erece.<\/p>\n
\u201cWhile they have lowered reserve requirements for financial institutions, a reduction in the policy rate can enhance investments and <\/span>expenditures, which are the primary engines of growth for the country.\u201d<\/span><\/p>\nUnionBank anticipates a cumulative decrease of 50 basis points this year.<\/p>\n
Conversely, analysts have indicated that the BSP might continue to adopt a cautious approach.<\/p>\n
\u201cAs we look forward, even though inflation remains within the BSP\u2019s 2-4% target range, we believe the BSP will probably keep its cautious position while awaiting more information on global trade <\/span>policies and their influence on inflation and growth,\u201d stated Chinabank.<\/span><\/p>\nIn February, the BSP unexpectedly maintained interest rates at 5.75%, marking its first policy meeting of the year.<\/span><\/p>\nThis action paused the easing cycle, having previously reduced borrowing costs by a total of 75 basis points last year through three consecutive meetings with 25-bp cuts.<\/p>\n
BSP Governor Eli M. Remolona, Jr. mentioned that \u201cglobal trade uncertainties\u201d were the reason behind the decision to hold policy.<\/span><\/p>\nNevertheless, he indicated that the central bank is still in an environment conducive to easing and hinted at the possibility of additional reductions of up to 50 basis points this year.<\/span><\/p>\n
\n
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