DBS forecasts PH’s November inflation at 3.5%

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” (Pixabay photo)” width=”960″ height=”678″ /> FILE: DBS Group Research, in a study, said upside risks are expected at the near term “given robust domestic demand as well as the proposed tax reforms that may be implemented starting next year.” (Pixabay photo)

MANILA — A research note by financial institution DBS forecasts the Philippines’ November 2017 inflation rate to remain flat at 3.5 percent compared to the month-ago level.

DBS Group Research, in a study, said upside risks are expected at the near term “given robust domestic demand as well as the proposed tax reforms that may be implemented starting next year.”

The first package of the tax reform measure is now being deliberated at the bicameral conference committee level after the Senate approved its version recently. The House of Representative approved its own version last May.

The first tax reform package targets to cut personal income tax, of which the on government revenues is targeted to be offset by an increase in oil taxes, among others.

Impact of this measure on inflation has been expected early on and add to the upside risks on the back of a rising inflation rate.

Last October, inflation registered another uptick to 3.5 percent from the previous month’s 3.4 percent. However, average inflation in the first 10 months this year stood at 3.

2 percent, within the 2 to 4 percent target range for 2017 to 2019.

Monetary officials’ average inflation assumption this year is 3.2 percent and executives of the Bangko Sentral ng Pilipinas (BSP) are confident that inflation until 2019 will remain within target.

Thus, the BSP’s policy-making Monetary Board has kept the central bank’s key rates at the same level since the neutral change in June 2016, in line with the implementation of the Interest Rate Corridor and at record-lows years before that.

To date, the central bank’s key rate is 3 percent, while floor and ceiling rates are at 2.5 percent and 3.5 percent, respectively.

“While we forecast CPI (Consumer Price Index) inflation to remain within the official two  to four percent target next year, we are of the view that the BSP is behind the curve in its policy tightening cycle,” the DBS research said. (PNA)