Price levels for the last month was seen at 3.3%, according to the Philippine Statistics Authority (PSA), which is the same with the forecast of UnionBank’s Economic Research Unit (ERU).

ERU called last month at exactly 3.3%, as the deceleration of annual increases among all commodity groups was led by the heavily-weighted food and non-alcoholic beverages index. This is now the fifth (5th) month of inflation deceleration.

With 2019 inflation average now at 3.8%, well within the BSP’s inflation target of 2-4%, is BSP now ready to unwind the 175 basis points hike of 2018? Deputy Governor Diwa Guinigundo, before the inflation data release, flagged that monetary policy will only be eased “when inflation averages near the mid-point of a 2-4% target”.

ERU still maintains its view that the BSP will prioritize an RRR cut over an RRP move. For timing, RRR cut may come at the upcoming May 9th Monetary Board meeting, and an RRP cut may come as early as the third quarter.

Article by Ruben Carlo Asuncion

Disclaimer: While this document is based on information obtained from sources we believe to be reliable, we do not make any representations as to its accuracy, completeness, correctness, timeliness or use for any particular purpose. Opinions and statements expressed here are those of their author(s) as of the date of this report and not of Union Bank of the Philippines (UBP). The opinions and statements provided in this document are subject to change without prior notice. Any recommendation contained in this document does not have regard to the reader’s particular investment objectives, financial situation and any other specific needs. This document is for informational purposes only and UBP is not soliciting any action based on it. Nothing here shall to any extent substitute for the independent investigations and the technical and business judgment of the reader. Your use of this document and any of its contents is at your own risk and UBP does not accept any liability for the results of any action or decision taken on the basis of or reliance on this document or any of its contents.