MANILA, July 5 -- Further deceleration of Philippines' inflation rate to 2.8 percent in June 2017 from month-ago's 3.1 percent is a "welcome news" and is in line with expectations, Bangko Sentral ng Pilipinas (BSP) Governor Nestor Espenilla Jr. said Wednesday.
The slowdown of rate of price increases for the second consecutive month this year is within the central bank's 2.4 to 3.2 percent forecast range for June.
Highest level, so far, this year is 3.4 percent, hit last March and April.
Last month's level, however, is higher than year-ago's 1.9 percent and brought the six-month average this year to 3.1 pecent, still above the midpoint of the government's two to four percent target.
During the same period, core inflation, which excludes volatile food and oil items, also slowed to 2.6 percent from month-ago's 2.9 percent, bringing the year-to-date average to 2.8 percent.
Espenilla said continued slowdown of inflation gives Philippines' monetary officials more leeway in instituting measures that would further support the country's financial market.
"This validation gives us the space to carefully consider our policy options with respect to fine tuning deployment of our monetary instruments to further the market-based development of the domestic financial market," he added.
With the sustained slowdown of domestic inflation rate, ANZ Research cut its inflation forecast for this year and the next.
In a research note, the researh arm of Australia-based financial institution slashed its inflation forecast for this year to three percent from 3.2 percent and to 3.3 percent for 2018, from 3.5 percent.
It, however, clarified that the latest foreacasts "do not consider the proposed tax reforms which could push inflation higher at least in the intial stages of implementation."
It said that, for one, the proposed hike in oil and vehicles excise taxes is expected to also increase transportation cost, which, it noted, accounts for about eigh percent of consumer price index (CPI).
Citing estimates by the Department of Finance (DOF), ANZ Research said impact of these excise tax hikes on headline inflation is about 0.9 percentage points during the tax reform's first year of implementation.
"We will revisit our inflation forecasts based on the progress the government makes in passing this tax package," it said.
Along with the cut in its inflation forecast, ANZ Research also revised its forecast for the hike in the BSP rates from two 25 basis points increase in the second half of 2017 to just one 25 basis points hike in the last quarter of 2017.
It also now considers additional 50 basis points increase in the first quarter of 2018. (Joann S. Villanueva/PNA)