Philippines to Update Inflation Gauge, but Target Unchanged
Manila. The Philippines said on Thursday (22/02) that it is updating the way it calculates its consumer price index to reflect changing consumption patterns, but its central bank believes the current inflation target of 2 percent to 4 percent remains appropriate.
The statistics agency said it would adjust the base year for the calculation of the CPI to 2012 from the current 2006.
The new calculation will be released from March 6, the same day as February inflation data is to be issued, but the statistics agency will also continue to release figures based on the old formula through to data for June.
The rebasing comes amid investor uncertainty after a spike in inflation in January.
Economists were caught by surprise after annual inflation in January quickened to a more than three-year high of 4.0 percent, and a slim majority are now penciling in an interest rate hike at the central bank's next policy review on March 22.
Last month's inflation hit the upper end of the government's 2 percent to 4 percent target, but the central bank has maintained that the factors driving inflation were "temporary" and would eventually moderate.
It is not yet clear how the rebasing will affect the inflation readings, but it could introduce a "small upside bias" because of the impact of higher taxes on certain commodities, Nomura said in a research note.
"A 2-4 percent [reading,] however measured, using any base year, remains appropriate target at this stage of our economic development and inflation dynamics," Diwa Guinigundo, central deputy governor, told Reuters in a text message, commenting on the CPI rebasing.
Food and non-alcoholic beverages are currently the biggest commodity group in the CPI basket, with a 38.98 percent weighting, followed by housing, water, electricity, gas and an other fuels group, which have a combined weighting of 22.47 percent.
There will be changes in the weightings of 11 commodity items in the CPI basket, Philippine Statistics Authority (PSA) chief Lisa Grace Bersales said, but gave no further details.
"Rebasing is necessary when the basket of the reference year no longer represents what is commonly purchased by the households," Bersales said in a statement.
"From a monetary policy standpoint, we believe Bangko Sentral ng Pilipinas will have to make the assessment based on an apple-to-apple comparison," Nomura said.
"In our view, BSP will unlikely judge a shift in its inflation outlook in either direction just because of the rebasing."
The Philippines last year held its spot as one of the fastest-expanding economies in Asia, posting 6.7 percent growth and sustaining expectations the central bank could tighten monetary policy this year to curb rising price pressures.
Reuters
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