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INFLATION may breach the Bangko Sentral ng Pilipinas (BSP) target,
according to the Development Bank of Singapore (DBS).
In its quarterly outlook, DBS said Philippine
monetary authorities should watch closely price increases.
Southeast Asia’s biggest lender lifted its
inflation forecast for the Philippines to 5 percent from the
previous 3.5 percent, adding this points to a tightening in monetary
policy in the second half of the year.
Inflation accelerated to a 16-month high last
February on record prices of oil and other commodities.
DBS said economic growth may slow down to 6.6
percent, adding this would still be above potential “so
inflationary pressures are not purely supply-side driven.”
“Fiscal pump-priming could also boost
inflation,” the bank said.
It said the peso should appreciate less rapidly
to 39 against the greenback, while consumer spending is set to
moderate to 5.7 percent.
“Inflation will remain a concern and the
central bank will, at best, leave borrowing costs at current levels.
Meanwhile increased uncertainty in the domestic and global economic
outlook will slow investment growth to 6.3 percent,” DBS said.
Last week, the policy-making Monetary Board
decided to keep the BSP’s overnight rates at five and seven
percent for the overnight borrowing and lending windows,
respectively, citing risks to inflation this year on the back of
skyrocketing oil and food prices worldwide. The BSP broke off from
its US counterpart’s monetary easing. The US Federal Reserve is
widely expected to cut its funds rate anew Tuesday night to calm
financial markets worldwide and provide a soft landing for a slowing
economy.
-- Chino S. Leyco
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