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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting comment on the recent inflation figures release in the Philippines.

Key Quotes

“Headline inflation held steady at 4.5% y/y in Apr, coming against our estimate and Bloomberg consensus of a rise to 4.7%. The lower-than-expected Apr inflation reading was largely due to cheaper staple food items (i.e. rice, vegetables and fruits) and the impact of stricter quarantine measures on recreational and cultural services, amid higher fuel prices and electricity rates.”

“Owing to year-ago low base effects particularly in transport and housing & utilities components amid elevated commodity prices, we expect headline inflation to continue staying above the central bank’s 2.0%-4.0% target range for the next one to two months. However, the extension of stricter containment measures until mid-May, the government’s non-monetary interventions and still sluggish labour market conditions would prevent the rise in inflation from exceeding the 5.0% level.”

“April’s inflation outturn and dimmer growth prospects due to the resurgence of virus infections could soon revive a debate about BSP cutting rates. Our baseline expectation remains that BSP will keep its policy rate unchanged at 2.00% for the rest of the year as the central bank is guarding against the second round of inflationary pressures. It is also letting fiscal policy measures filter through the economy and an acceleration in mass vaccination to strengthen the economic recovery in 2H21.”