Inflation seen at nearly 3-year low

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    Annual inflation in August likely dropped below the bottom range of the central bank’s target range for the year, due to a high base effect and a drop in rice and utility prices, a Reuters poll showed.

    The Bangko Sentral ng Pilipinas (BSP) had set a 2 percent-4 percent target range for the year.

    The median forecast in a Reuters poll of 11 economists was for the Consumer Price Index (CPI) to have risen 1.8 percent in August from a year earlier, the weakest since October 2016, and easing from previous month’s gain of 2.4 percent.

    The estimate, if it proves to be correct, could seal the deal for a third interest rate cut this year.

    Slowing inflation allowed the central bank to cut rates twice by a total of 50 basis points in May and August to give the Philippine economy a lift and buffer it from the fallout from the US-China trade war.

    BSP Governor Benjamin Diokno has flagged a further quarter-point interest rate reduction before the end of 2019 to shore up economic growth, which slipped to its weakest in 17 quarters in April-June.

    The central bank next meets on Sept. 26 to review policy.

    BSP raised the rates by a total of 175 basis points last year to rein in inflation, which peaked at a near-decade high of 6.7 percent in September and October.

    Inflation is seen to average 2.6 percent this year and 2.9 percent next year, the central bank has said, well within its target of 2 percent-4 percent for both years. – Reuters