Little Risk for PHL Inflation to Breach Upper Bound

ANZ Research, the research unit of the Australia and New Zealand Banking Group Ltd. (ANZ), sees little risk for the Philippines’ inflation rate to breach the upper bound target in the next 18 months.

The country’s inflation rate for August has decelerated to 1.8 percent from 1.9 percent in July as annual gains in prices of food and non-alcoholic beverages slowed down coupled with contractions in prices of utilities and transport.

“We see little risk of inflation breaching the upper bound of the central bank’s 2.0 to 4.0 percent target range over the next 18 months,” ANZ Research said.

ANZ Research projected headline inflation to average 1.9 percent by end of this year and 3.0 percent next year.

It also reiterated its forecast that the Bangko Sentral ng Pilipinas (BSP) is likely to maintain its policy tool through second quarter next year.

“Less than half of the excess liquidity in the banking system has migrated to the 7-day and 28-day term deposit facilities (TDF) of the central bank. In our view, the weekly auction size of the TDFs will need to be adjusted further before it emerges as the main liquidity management tool of the central bank,” it said.

“Until then, we see limited room for the BSP to adjust its policy stance and lower its reserve requirement ratio (currently at 20 percent),” ANZ Research added. (PNA) CVL/KMC