PH November inflation climbed to 0.6% – HSBC

MANILA, Philippines – The Hongkong and Shanghai Banking Corporation (HSBC) believes inflation accelerated to 0.6%.

Headline inflation in October stabilized at 0.4% following a 3-month consecutive drop to less than 1%. (READ: Inflation steady at 0.4% in October)

Inflation, the rate at which prices of goods and services rise, has steadily eased – from 2.5% in February, 2.4% in March, 2.2% in April, 1.6% in May, 1.2% in June, 0.8% in July, 0.6% in August, and a record fall to 0.4% in September.

In its latest Association of Southeast Asian Nations (ASEAN) Perspectives, HSBC said the consumer price index (CPI) of member-economies would fall below the targets this year.

HSBC pointed out the benign inflation environment in the region would “allow central banks to keep policy accommodative, or even ease further when and where conditions allow.”

The Bangko Sentral ng Pilipinas (BSP) has further lowered its inflation forecast to 1.4% instead of the previous projection of 1.6% because of the continuing softening of oil prices, as well as other food prices.

Inflation forecast for 2016 was also reduced to 2.3% instead of 2.6% and 2.9% for 2017, instead of 3% amid the continued decline in oil and other commodity prices, as well as an economic growth fueled by continued consumer spending.

BSP likely to tweak rates

The bank said BSP would likely tweak rates in time for the adoption of an interest rate corridor (IRC) system in the second quarter of next year. (READ: BSP leaves interest rates unchanged since October)

“The BSP in the Philippines is planning operational changes in the second quarter of 2016, but any rate moves should not be seen as a change in policy stance,” it added.

HSBC sees the Bank of Thailand and Bank Indonesia cutting interest rates next month to dust off the impact of the interest rate hike by the US Federal Reserve this month.

Likewise, the Monetary Authority of Singapore is expected to ease its policy stance while Bank Negara of Malaysia would keep interest rates steady.

HSBC said commodity prices have yet to show signs of recovery, but disruptions from El Niño would still be felt in the coming months.

“Drought conditions have persisted in most of Indonesia and the Philippines for several months now. Fortunately, the impact on food prices has yet to become a serious issue,” the bank added.

HSBC said both Indonesia and the Philippines have ramped up rice imports to keep prices at bay. Rappler.com