Inflation likely sizzled above BSP target in April

Inflation likely sizzled and jumped above the upper end of the Bangko Sentral ng Pilipinas’ (BSP) 2 to 4 percent target range of manageable price hikes in April.

All 22 April inflation forecasts collected by the Inquirer last week were above the 4 percent posted in March. The Philippine Statistics Authority’s (PSA) consumer price index (CPI) report for last month will be out on May 5.

In the Inquirer’s poll, China Bank’s Domini Velasquez, Goldman Sachs Economics Research, and ING’s Nicholas Antonio Mapa had the highest headline inflation forecast of 4.8 percent year-on-year for April.

Mapa attributed his estimate to “upward pressure delivered by surging transport costs and expensive utilities,” adding that “food inflation may trend higher as well, especially for cereal items.” Russia’s invasion of Ukraine jacked up global commodity prices, especially of food and oil, and the World Bank last week warned that elevated prices may extend up to 2024.

“Second round effects may also be creeping in as higher transport costs feed through to the rest of the CPI basket,” Mapa added.

Rate hike

High inflation, coupled with a possibly “robust” first-quarter gross domestic product (GDP) performance “could be enough to convince BSP Governor Benjamin Diokno to push forward with his rate hike by May or more likely by June,” Mapa said. The next BSP meeting on the monetary policy stance on May 19 will happen a week after the government’s first-quarter GDP report on May 12.

Bank of the Philippine Islands’ Emilio Neri Jr., BDO Unibank’s Jonathan Ravelas, Security Bank’s Robert Dan Roces, as well as University of the Philippines-Los Baños’ (UPLB) Agham Cuevas projected 4.7 percent. “Inflation remains mostly cost-push driven, and now fully reflects the effects of the Russia-Ukraine conflict on prices. We expect inflation to peak this quarter and ease above the 4-percent level for the rest of the year,” Roces said.

Inflation pressure

Barclays’ Shreya Sodhani, Capital Economics’ Gareth Leather, HSBC Global Research, Pantheon Macroeconomics’ Miguel Chanco, Philippine National Bank’s Alvin Joseph Arogo, Regina Capital’s Luis Gerardo Limlingan, and Rizal Commercial Banking Corp.’s Michael Ricafort forecast a 4.6-percent inflation rate last month. “Typhoon ‘Agaton’ likely added to the inflation pressure as well,” Arogo noted.

For ANZ’s Sanjay Mathur, Oxford Economics’ Makoto Tsuchiya and Sian Fenner, Sun Life Financial’s Patrick Ella, United Overseas Bank’s Loke Siew Ting, and University of Asia and the Pacific’s Victor Abola, the rate of increase in prices of basic commodities on April hit 4.5 percent year-on-year. “We think the inflationary pressure will linger given our forecast of higher-for-longer global commodity prices, which will feed into domestic prices as the Philippines is a net commodity importer,” Oxford Economics’ economists said.

Citi’s Nalin Chutchotitham projected 4.4 percent, while the lowest forecast of 4.3 percent was shared by Moody’s Analytics’ Steven Cochrane and UnionBank of the Philippines’ Ruben Carlo Asuncion, as the latter also pointed to the direct effects of a weaker peso on inflation. INQ