MANILA: The Philippines' annual inflation rate eased in December to its lowest in 11 months, bolstering expectations the central bank will cut policy rates early in the new year to support growth amid doubts over the pace of the global economic recovery.
Some analysts expect the Bangko Sentral ng Pilipinas (BSP) will deliver a 25 basis point cut at its first policy meeting this year on Jan. 19, with inflation now less of a worry.
Annual headline inflation in December was 4.2 percent, compared with market forecasts of 4.6 percent, based on a new data series using 2006 prices.
The index rose 4.0 percent under the old data series with 2000 as the base year, matching the low end of the central bank's forecast of 4.0 to 4.9 percent for December.
"I think the numbers are a relief to the BSP as food price pressures do not appear to have materialized despite the crop damage," said Eugene Leow, an economist at DBS in Singapore, referring to damage caused by a typhoon that hit southern Philippines last month.
"Another 50 basis points worth of rate cuts are pencilled in for the first half of the year. The first 25 basis points cut could certainly come as soon as the upcoming meeting in January," Leow said.
Inflation in 2011 averaged 4.8 percent under the new 2006 series, and was at 4.4 percent under the old 2000 base year. Both are within the government target of 3 to 5 percent.
The central bank will switch to the 2006 data series starting January in forecasting inflation. The government said it would soon announce its 2012 and 2013 inflation targets.
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