August 5, 2019 / 4:41 AM / 14 days ago

Slower July inflation to give Philippine central bank room to support growth: Reuters poll

MANILA (Reuters) - Philippine annual inflation is expected to have slowed for a second straight month in July, giving the central bank room to cut rates to support an economy, which likely grew at a lackluster pace in the second quarter, a Reuters poll showed.

FILE PHOTO - A security guard stands beside a logo of the Bangko Sentral ng Pilipinas (Central Bank of the Philippines) posted at the main gate in Manila, Philippines April 28, 2016. REUTERS/Romeo Ranoco/File Photo

Annual inflation rate in July was seen at 2.4%, easing from the previous month’s rate of 2.7%, and marking the slowest annual pace of price increase in two years, due to cheaper food and fuel prices, and a strong peso.

Inflation data for July will be released on Aug. 6, while GDP data for the second-quarter will be released on Aug. 8, ahead of a policy meeting on Thursday.

While cooling inflation is expected to have boosted domestic consumption in the second quarter, economists said, growth for that period probably remained unimpressive due to weak government spending.

Growth in the June-quarter probably accelerated to 5.9%, the median forecast in a Reuters poll of 10 economists showed.

While stronger than the previous quarter’s 5.6% growth, the estimate remained below the government’s 6%-7% target this year.

With growth unlikely to have posted a sharp rebound, the central bank is expected to resume cutting interest rates, with economists in the poll unanimously expecting a 25 basis point cut on Thursday.

The U.S. Federal Reserve’s decision to cut interest rates last week, amid slowing global growth, should also provide impetus to the Philippine central bank to lower interest rates, economists said.

The Bangko Sentral ng Pilipinas hiked interest rates by a total of 175 basis points last year to rein in inflation, which peaked at a near-decade high of 6.7% in September and October.

However, with inflation no longer a worry, the central bank began to unwind its tighter policy with a quarter-point rate cut in May, the first since October 2012, to shore up the economy against risks including simmering U.S.-Sino trade tensions.

Some economists expect more policy rate easing before the year ends and further cuts in banks’ reserve requirement ratio (RRR) after a 200 bps phased reduction in RRR through July, to spur greater economic activity.

Reporting by Karen Lema, Editing by Sherry Jacob-Phillips

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