Philippines inflation slowed to a 16-month low of 4.8 percent in April and a government official said on Tuesday annual changes in consumer prices could hit zero percent in July or August, raising the chances of more rate cuts. Like other central banks, the Philippines has been cutting rates to support the economy during the global downturn. But there is evidence the worst of the current downturn may be over, a senior official said.
"Locally, we are over the worst in our view," Dennis Arroyo, head of policy planning at the economic planning agency, told reporters. "I think the worst is behind us." Arroyo also said it was possible the annual rise in consumer prices would slow to zero percent in July or August given rapid declines in commodities prices from elevated levels last year. Inflation hit its peak in August last year at 12.4 percent, a 17-year high. The government said on Tuesday inflation fell from 6.4 percent in March, broadly in line with market forecasts, hitting its lowest since December 2007.
Economists polled by Reuters last week had predicted annual inflation of 4.7 percent in April and most saw the central bank cutting rates by 25 basis points at its May 28 policy meeting. Central bank Governor Amando Tetangco said after the release of April figures that the data gave authorities more room to ease policy, but he also said the central bank was monitoring how previous policy moves have filtered into the economy.
The central bank will review its rates policy on May 28. "We are encouraged by the increased flexibility afforded to monetary policy by the continued improvement in the inflation outlook, coupled with the stability of the financial markets," Tetangco said in a mobile text message to reporters. Kenneth Cheng, chief analyst at Informal Global Markets in Singapore, said the central bank's forecast of a sharp further drop in inflation meant more monetary easing was in store.
"The implication really is, we are going to see more rate cuts especially in light of lower growth forecasts," he said. Arroyo said growth this year was likely to hit 4 percent, near the high-end of the government's official 3.1-4.1 percent forecast and way above the zero growth estimate of the International Monetary Fund.
"We are confident about the 4 percent growth," he said, adding that job losses have slowed substantially last month at just a little over 1,000 workers in the first two weeks of April. There were more than 10,000 job losses each month in the first quarter, peaking at about 14,500 in March alone.