Phillipine's inflation likely to stay low for longer

Inflation, in the Phillipines is expected to remain low for the rest of 2015 and in 2016. Standard Chartered forecasts inflation at 1.9% in 2015 and 2.9% in 2016 (from 2.2% and 3.5%, respectively). Given strong base effects in Q2 and Q3 last year, y/y inflation is likely to ease further and bottom out only in Q3. However, m/m inflation has been trending up, and is likely to rise further during this period. Energy inflation may be a swing factor.

Food inflation is likely to stay muted. The food component accounts for almost twofifths the CPI basket and has been the primary driver of inflation in the past decade. Food (and thus headline) inflation appears to be following a three-year cycle, with food inflation last peaking in 2014, 2011 and 2008. 

Food inflation in 2014 was domestically driven but higher inflation in 2008 and 2011 was driven by higher international prices. If the cycle continues, we may see higher inflation only in 2017. 

Retail prices of major food commodities have been stable recently, even decreasing slightly for some items - this has reflected in inflation numbers as well.

Rice inflation decreased m/m for six consecutive months until May. External price pressures have been muted, with the Commodity Research Bureau (CRB) food index remaining negative on y/y terms since January, notes Standard Chartered.