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CONSUMER price increases will pick up further this year and next,
prompting the Bangko Sentral ng Pilipinas (BSP) to raise its key
interest rates, according to pundits.
In a report, the BSP said private-sector
economists expect higher inflation on possible increases in wages
and electricity rates in the second half of the year. They said the
average inflation rate will reach 4.9 percent, higher than their
earlier forecast of 3.9 percent. The survey covered 13 banks.
The BSP set an inflation target of 3 percent to
5 percent this year.
“Upside risks to inflation are expected to
come mainly from high prices of fuel and other major commodity
prices. In addition, possible increases in electricity and wages in
the second half of the year may also put upward pressure on
prices,” the report said.
The economists however said the strong peso and
surge of foreign exchange inflows in the coming quarter would temper
price hikes.
For next year, they expect inflation to hit 4.2
percent.
In a separate report, Edward Teather, economist
at UBS Investment Research said the BSP would raise its policy rates
by 100 basis points over the next 12 months.
To date, the BSP’s overnight borrowing and
lending rates stood at 5 percent and 7 percent, respectively.
“The differential between actual inflation and
the policy target is greater now, but the triggers for a policy rate
adjustment will remain the same. Watch for higher than expected
minimum wage growth, evidence of sustained increases in inflation
expectations and broad based increases in inflation,” Teather
said.
The government earlier said Philippines
inflation rate rose to a three-year high of 8.3 percent last month.
“April’s surprisingly sharp rise in
inflation was a function of all major components. Food accounted
disproportionately for the rise in inflation, with food-price
inflation rising over 3 percentage points from 8.2 percent to 11.4
percent,” Teather said.
The UBS economist said inflation this year would
average 7.2 percent, higher than the investment bank’s original
forecast of 6.7 percent, and last year’s actual 2.8 percent.
BSP Deputy Gov. Diwa Gunigundo said the second
round effects of inflation will drive monetary authorities to adjust
policy rates.
Guinigundo said inflation will peak towards the
second quarter of the year and decline in the fourth quarter.
At the Philippine Dealing System, the peso
closed weaker at 42.615 against the dollar, from Wednesday’s
closing price of 42.440.
Meanwhile, local share prices closed higher
Thursday, reversing early losses on gains in Petron Corp. and
bargain hunting in blue-chips, dealers said.
The composite index put on 21.19 points to
2,760.62, off a high of 2,762.41. The all-share index was up 11.28
points at 1,723.68.
There were 50 advancers and 44 decliners, while
55 issues were steady.
Turnover shrank to P2.9 billion from
Wednesday’s P4.2 billion.
Petron advanced after local conglomerate JG
Summit Holdings Inc. offered to buy the government’s 40-percent
stake in the oil refiner.
Its offer is at a higher price than that offered
by London-listed Ashmore Group for Saudi Aramco’s 40-percent stake
in Petron.
Both offers are also much higher than Petron’s
current market price.
Trading however was lackluster at the opening
bell, on fears about inflation after oil prices climbed to a fresh
record near $124 a barrel overnight.
“The market staged a technical rebound from
oversold levels,” said Nestor Aguila of DA Market Securities.
“But the lean volumes mirrored investors’
cautious outlook for the market given speculation that oil prices
may jump to $200 a barrel.”
“While the market may have seen the worst of
the US credit crisis, it hasn’t seen the worst of record oil
prices,” added Astro del Castillo of First Grade Holdings.
Philippine Long Distance Telephone Co. rose 1
percent to P2,590. JG Summit advanced 4.4 percent to P9.60.
Bucking the trend, Manila Electric Co. closed
3.6 percent lower at P67.50. San Miguel Corp. A fell 1.1 percent to
P46. Its B shares were steady at P49.
-- Maricel E. Burgonio, Chino S. Leyco with AFP
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