Analysts shrug off PH inflation worries

The rate of rise in consumer prices is “not likely to kick up much” in the second quarter despite the increase in oil prices.

According to a joint research by First Metro Investment Corp. and the University of Asia and the Pacific, stable prices of food will significantly offset the upward pressure brought on by higher oil prices.

In the latest issue of “Market Call,” FMIC and UA&P noted that oil prices had stabilized at 2 percent to 3 percent of their record highs despite a sharp climb in the first quarter.

Expanded inventories in the United States have also tempered the rise in the prices of crude oil, the study said.

“There is little pressure for crude oil prices to further move up, considering that Saudi Arabia has raised its output, and Iran’s sanctioned oil should find its way directly into markets like China, India, and Japan,” it added.

Also, FMIC and UA&P said the government’s plan to issue less debt notes in the second quarter would quell inflation fears.

They cited the Treasury, which announced a domestic borrowing plan of P104.5 billion for the quarter ending in June—P13 billion lower than the plan for the first quarter, and P24 billion lower than the amount actually borrowed in the second quarter of 2011.

“The short supply of debt notes is likely to offset higher inflation fears due to crude oil prices,” they said.

Last month, Market Call predicted that inflation would average at 3.5 percent in the first quarter.

This was higher than the actual 3.1 percent reported by the National Statistics Office.

FMIC and UA&P now expects inflation to ease further in the second quarter despite the surge in crude oil prices, noting that the rate of rise in prices is on a downtrend with ample food supply due to productive harvests in Luzon and the Visayas.

Inflation may settle at 2.9 percent in April, 3.1 percent in May and 3.2 percent in June, they added.