Philippines headline inflation forecast to ease

Compared to 3.6% in September, it is pegged at 3.3% YoY in October.

DBS Group Research noted:

Headline inflation is expected to ease to 3.3% YoY in October, compared to 3.6% in the preceding month. For the short term, inflation has peaked at 3.8% in August and is not an immediate concern.

The pace of food price increase has moderated in September and oil prices have continued to edge lower over the last few weeks. Oil firms have also reduced pump prices over the last two weeks.

Going into 2013, the inflation trajectory still appears benign and we are maintaining our average inflation forecast of 3.8%, noting that lackluster global growth is unlikely to trigger a sharp increase in commodity prices.

Similarly, demand-pull inflation resulting from a rapid recovery in exports appears unlikely. Domestically, the economy has been performing relatively well and loan growth (at an average of 15% YoY in the first eight months of the year) has not been excessive.

As such, we think that inflation will be well-contained and the central bank (BSP) can maintain an accommodative monetary policy for the most part of 2013.