Q4 2015 inflation settles at 1.0% on weak oil, food prices – BSP

Consumer prices rose at a slower 1.0 percent in the fourth quarter of 2015, from 3.6 percent a year earlier, on the back of ample supply of food and petroleum, the Bangko Sentral said on Friday.

This brought the average inflation to 1.4 percent for the whole 2015.

The government targeted the whole-year inflation to settle between 2 and 4 percent.

"Easing petroleum supply and ample food supply contributed largely to the low inflation readings during the year," Dennis D. Lapid, deputy director of the BSP Department of Economic Research said in a briefing.

For 2016, the BSP also expects inflation to hover at the 2 to 4 percent range.

Domestic rice supply has been supported by imports as well as the harvest and milling season in October to December, while oil prices have continued to decline amid an oversupply the re-entry of crude supply from Iran after international sanctions have been lifted.

"The overall view is we'll continue to see an oversupply for 2016," Lapid said.

The latest numbers, however, were higher than the 0.6 percent the previous quarter.

"Inflation pressures in the Q4 2015 were traced mainly to higher prices of certain food items due to seasonal demand and the adverse impact of recent typhoons that visited the country. Likewise, non-food inflation inched up as prices of service-related CPI (consumer price index) components accelerated during the quarter," the central bank's inflation report read.

Core inflation

Core inflation, which excludes price sensitive food and energy items, dropped to 1.8 percent from 2.7 percent.

The latest figures brought the full-year core inflation to 2.0 percent from 3.0 percent.

For 2016, the BSP also expects inflation to hover at the 2 to 4 percent range.

"Expectations are still anchored on our target of 2.4 percent. Domestic demands remain," Lapid said, citing the sustained business and consumer confidence.

Business confidence rose to its highest level in two years during the fourth quarter of 2015, with the consumer confidence up at 51.3 percent from 41.1 percent the previous quarter, the latest BSP survey showed. 

"The addition of Iran to global supply and the increased output from the OPEC (Organization of the Petroleum Countries) is expected to continue the oversupply for this year – that might turn out to be a downside risk for inflation," Lapid noted.

Oil prices fell to a new 12-year low earlier this week but rallied by more than 4 percent on Friday on the back of the renewed optimism in equity markets.

In September last year, the central bank said it expects inflation at 2.6 percent for 2016 – reflecting the impact of the El Niño phenomenon on consumer prices.

"We do expect that the El Niño will be more serious. Any additional risks from the dry weather conditions related to El Niño would significantly affect the balance of risks," BSP Deputy Governor Diwa Guinigundo said.

In September last year, the central bank said it expects inflation at 2.6 percent for 2016 – reflecting the impact of the El Niño phenomenon on consumer prices. 

"We do expect that the El Niño will be more serious. Any additional risks from the dry weather conditions related to El Niño would significantly affect the balance of risks," BSP Deputy Governor Diwa Guinigundo said. – VS, GMA News