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ING Bank sees Aug. inflation at 2.9%

An economist of ING Bank Manila continues to see manageable inflation in the Philippines, with the August 2017 level eyed at 2.9 percent, within the government's full-year  target of two to four percent.

Last July, inflation ticked-up to 2.8 percent from month-ago's 2.7 percent, bringing the average to date to 3.1 percent. July 2016 inflation stood at 1.9 percent.

"Offsetting pressures imply not only a stable inflation environment but also at a manageable rate," ING Bank Manila senior economist Joey Cuyegkeng said in a research note dated Sept. 4, 2017.

Cuyegkeng said ample supply of agricultural products, along with the impact on prices of chicken due to the avian flu situation in Central Luzon in recent weeks, are seen to counter the rise in oil prices and the firmer prices of meat.

"The impact on the poultry industry has been contained, but fears of the avian flu virus have cut overall consumption and depressed chicken prices," he said.

Impact of the peso weakness, meanwhile, was offset by the moderate growth of domestic liquidity or M3, he said, citing the 12.3 percent average rise of M3 in the last 19 months.
    
"We expect inflation to average 3.1 percent this year," he said.
    
The ING Bank economist is eyeing higher average inflation rate in 2018 at 3.5 percent due to the impact of the proposed tax reforms, which is targeted to increase the monthly take home pay of workers and increase prices of fuel and sweetened beverages.
    
"Strong domestic demand and rising imbalances could lead to overheating. We expect policy settings to remain steady until the December policy meeting when we expect a 25 bp (basis points) rate hike," he added.
    
To date, the Bangko Sentral reverse repurchase or overnight borrowing rate is three percent, the repurchase or lending rate is 3.5 percent and rate of the special deposit account is 2.5 percent.