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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting reviewed the recently published inflation figures for the month of March in the Philippines.

Key Quotes

“Headline inflation slowed for the second straight month to 2.5% y/y in Mar (from 2.6% y/y in Feb), in line with our estimate (2.4%)… Cheaper non-food items such as electricity and transportation were key factors pulling down headline inflation last month.”

“Year-to-date, inflation averaged at 2.7% in 1Q20 (1Q19: 3.8%). The confluence of bleak economic growth prospects, falling crude oil and commodity prices, as well as constrained consumption following the one-month “enhanced quarantine” measures suggests that inflation risks are tilted toward the downside as the year progresses. We maintain our 2020 full-year inflation forecast at 2.5% for now (BSP’s forecast: 2.2%).”

“A benign inflation environment coupled with a gloomier growth outlook provide room for Bangko Sentral ng Pilipinas (BSP) to ease further in the near term. We have factored in another 50bps cut in the overnight reverse repurchase rate to 2.75% in 2Q20. BSP Governor commented yesterday (6 Apr) that the central bank is open to tweaking monetary settings outside its review cycle if warranted. The next monetary policy meeting is scheduled on 21 May”.