Philippines: Inflation risks and BSP stance – DBS

DBS Group Research’s Radhika Rao expects Philippines inflation to climb further above the Bangko Sentral ng Pilipinas’ (BSP) target, driven by food, fuel and currency weakness. She notes some easing in sequential pressures from lower fuel prices and utilities. Rao underscores that inflation outcomes are shaped by policy frameworks and that BSP is likely to tighten domestic rates further this year.

Inflation seen above BSP target band

"Philippines’ inflation, due on Friday, is expected to rise past 8% yoy from 7.2% the month before, well past BSP’s target of 2.0-4.0%."

"Upside pressures were likely driven by food (rice, vegetables, meat, etc.), domestic fuel price increases (compared to last year) and a weak currency."

"Sequential pressures, nonetheless, must have eased from a recent rollback in domestic fuel prices, moderation in few food segments, and slightly lower utility rates."

"Outcomes are partly policy-filtered, with differences in retail price inflation reflecting varying levels of subsidy support and pass-through mechanisms."

"We expect the BSP and BI to tighten domestic rates further this year."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)