Inflation may have eased in December from the 21-month high seen in November, a BusinessWorld poll showed. — PHILIPPINE STAR/MICHAEL VARCAS

INFLATION may have eased slightly in December, as the rise in food prices was tempered by the normalization of supply chains after the spate of typhoons in the prior month.

A BusinessWorld poll of 13 analysts last week yielded a median estimate of 3.2%, the midpoint of the 2.9-3.7% forecast range given by the Bangko Sentral ng Pilipinas (BSP) and within the 2-4% target for 2020.

If realized, the estimate will be slightly slower than the 21-month high of 3.3% in November but faster than the 1.3% logged in December 2019.

Analysts’ December inflation estimates (2020)

The Philippine Statistics Authority (PSA) is set to release the December inflation data on Tuesday (Jan. 5).

Analysts said inflation likely eased in December compared with November, when a series of strong typhoons caused crop damage in parts of Luzon that drove up food prices.

“Food prices are expected to have retreated as typhoon season came to end,” ANZ Research Analyst Kanika Bhatnagar said.

Rizal Commercial Banking Corp. (RCBC) Chief Economist Michael L. Ricafort said the higher food prices in November “already started to ease with some normalization of supply chains/logistics, but offset by the latest storm damage due to Tropical Depression Vicky that caused flooding in parts of Mindanao, Visayas, and Northern Luzon, especially Cagayan Valley.”

Inflation on food items quickened to 4.5% in November from 2.1% in October, data from the PSA showed. This was on the back of a double-digit increase of 14.6% (from -0.5% in October) in vegetable prices as well as faster pickup in prices of meat (8.2% from 4.7%), fruits (5.6% from 4.6%), and fish (5.3% from 3.7%), among others.

University of Asia and the Pacific Economist Victor A. Abola pointed out that rice prices were “stable to slightly down” in December.

PSA data average showed farmgate price of palay or unmilled rice inched up 1.1% week on week to P16.14 per kilogram in the second week of December. Meanwhile, average wholesale prices of well milled and regular milled rice fell by 0.2% and 0.1% to P37.42 and P33.42 per kilogram, respectively.

“This would more than offset the rise in fuel prices due to higher crude oil prices abroad,” Mr. Abola said.

Data from the Energy department showed local oil companies hiked prices of gasoline, diesel, and kerosene cumulatively by P2.65, P2.95, and P3.05 per liter, respectively, in December.

Analysts noted the increase in transport prices may be an upside risk to inflation.

“Higher transport costs will push headline inflation higher. Tepid demand in a time of COVID-19 (coronavirus disease 2019) will offset cost push pressure to some extent,” ING Bank N.V. Manila Senior Economist Nicholas Antonio T. Mapa said.

In November, the transport index eased to 7.6% from 7.9% in October. Despite a slower print, the National Economic and Development Authority said the transport index was among the top contributors to the headline inflation given the restrictions on public transport due to the pandemic.

Inflation stood at 2.5% year to date as of November. If the 3.2% inflation in December is realized, this will bring the annual average to 2.6% — the target set by the BSP.

Given the inflation trajectory remains within the BSP’s target range, analysts said further easing may still be on the table.

“To maintain consumer and investor confidence, BSP might push for another interest rate cut in the first quarter of 2021,” Mitzie Irene P. Conchada, an economist from the De La Salle University said.

“The expected easing of inflation until February 2021 could still support any further monetary easing measures until then,” RCBC’s Mr. Ricafort said.

BSP Governor Benjamin E. Diokno has said in a Bloomberg interview in late December that policy rates may remain low until 2022 to support economic recovery.

Last year, the BSP cumulatively slashed the overnight reverse repurchase, lending, and deposit rates by 200 basis points to record lows of 2%, 2.5%, and 1.5%, respectively.

This year, the Monetary Board’s first policy-setting meeting is scheduled on Feb. 11. — Luz Wendy T. Noble

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