• Analysts see April inflation at 1.1-1.7%


    INFLATION in April likely stayed at 1.1 percent or picked up to 1.7 percent in April, which should allow the central bank to keep its accommodative policy rates unchanged, analysts polled by The Manila Times said in an estimate.

    The analysts see the higher costs of fuel, electricity and food behind the acceleration in the rise in consumer prices last month.

    Official April data will be released on Thursday.

    Comparative inflation in April 2015 settled at 2.2 percent. The rise in consumer prices accelerated slightly to 1.1 percent in March from 0.9 percent in February.

    The Bangko Sentral ng Pilipinas (BSP) last week offered an estimate of between 0.7 percent and 1.5 percent for inflation in the fourth month of the year, while the Department of Finance predicted 1.3 percent.

    The BSP noted that rate increases for both electricity and water as well as higher oil prices had put upward pressure on inflation in April.

    Providing the highest estimate among the analysts polled was Deutsche Bank economist Diana del Rosario, who expects inflation to have gained pace to 1.7 percent “driven by a faster increase in food prices, as well an uptick in fuel prices and utility rates.”

    Luz Lorenzo, Maybank ATR Kim Eng economist, said April inflation likely settled at 1.5 percent. “Food and fuel price hikes are the reasons for higher inflation rate,” she said, but suggested that the still-benign rate would not cause the BSP to rethink its monetary policy stance.

    Mabellene Reynaldo, analyst at Metropolitan Bank and Trust Co. (Metrobank) Research, offered a similar view, saying the bank’s April inflation forecast of 1.3 percent was based on the broad increase in both food and oil prices.

    Nevertheless, “We expect [interest]rates to remain steady given low inflation expectations and still steady US policy rates,” she said.

    Eugenia Victorino, ANZ Research economist, made the same forecast as pump oil prices continued to rise, accompanied by increases in utilities during the month.

    “With inflation likely to remain within the central bank’s target range, we expect the BSP [rates]to remain on hold to facilitate the seamless introduction of the interest rate corridor over the coming months,” she said.

    London-based consultancy research firm Capital Economics also foresees inflation picking up to 1.3 percent.

    Justino Calaycay, A&A Securities Inc. marketing and research head, said inflation likely settled in a range of 1.3 percent to 1.5 percent given successive increases in fuel and utility rates as well as increased consumption.

    “We’ve seen global oil prices strongly rebounding off their lows and this should translate to further upward pressures on prices,” he said.

    Joseph Incalcaterra, Asia-Pacific economist for banking giant HSBC, also noted higher energy and food prices, but offered a slightly lower forecast of 1.2 percent inflation in April.

    “Overall price pressures remain weak and inflation will come close to the lower end of the BSP’s forecast range this year,” he said.

    Apart from operational changes from the BSP’s implementation of the interest rate corridor, Incalcaterra also did not expect any change in monetary policy this year.

    Joey Cuyegkeng, ING Bank Manila senior economist, took a similar view, and said inflation was modestly higher at 1.2 percent in April.

    “No change in the monetary policy stance of BSP is seen, but BSP may eventually use its policy leeway after full implementation of IRC [interest rate corridor]by June, and if the external economic environment remains guarded against weak economic activity,” he said.

    Providing the lowest forecast is Jack Chambers, associate economist at Moody’s Analytics, who sees inflation remaining relatively low at 1.1 percent, unchanged from March.

    “While oil prices have been increasing since January, the effects of this will take some time to be fully reflected in consumer prices. Meanwhile, improving crop yields due to the tapering out of a severe El Nino, will keep food inflation low,” he said.

    The low inflation, combined with strong economic growth, will allow the BSP to maintain its current accommodative policy stance, he added.

    BSP Governor Amando Tetangco Jr., in explaining the central bank’s 0.7 percent to 1.5 percent projection for April, last week said, “The increase in domestic oil prices, as well as in power and water rates posed inflation pressures during the month.”

    The Finance Department, meanwhile, tagged lower electricity and fuel prices year-on-year and moderate food price increases, as reasons for its slightly lower forecast.

    “Price stability will continue to give policy makers room for maneuver in addressing macroeconomic volatilities,” the DOF said in its latest economic bulletin.


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