MANILA, Philippines - London-based Barclays Capital Ltd sees the country’s inflation easing to 3.5 percent this year from 4.7 percent last year amid soaring oil prices in the world market.
In a report, Barclays said inflation this year would still fall within the target range of between three percent and five percent set by the Bangko Sentral ng Pilipinas (BSP).
“We expect inflation to average 3.5 percent in 2012, above the BSP’s projection of 3.1 percent. BSP’s inflation target range is three percent to five percent,” the investment bank said.
It added that inflation for the month of March would inch up to 2.8 percent from a 29-month low of 2.7 percent in February.
“Inflation to increase slightly on rising food and energy prices, although clothing and housing prices are likely to ease,” Barclays added.
After easing to its lowest level in 29 months, BSP sees inflation rising due to soaring oil prices, higher food prices, and the continued weakening of the peso against the US dollar.
BSP Governor Amando Tetangco Jr. earlier said inflation for March would range between 2.2 percent and 3.1 percent compared to a 29-month low of 2.7 percent in February.
“Inflation could be higher than February’s rate of 2.7 percent if the impact of higher international prices, the weak peso, and increases in the prices of certain food items were not fully offset by lower utility rates and lower prices of some vegetables,” Tetangco stressed.
Despite the projected uptick in inflation, the BSP chief is still confident that inflation would fall within the three percent to five percent target set by the BSP for this year and next year.
However, he pointed out that the possibilities of second round effects resulting from higher oil prices point to higher inflation ranges ahead.
The BSP Board has so far slashed interest rates by 50 basis points this year, bringing the overnight borrowing rate back to a record level of four percent and the overnight lending rate to six percent.
Due to benign inflation outlook and moderate global economic growth, the BSP reduced interest rates by 25 basis points last Jan. 19 and by another 25 basis points last March 1.
The next policy rate-setting meeting of the Monetary Board is scheduled on April 19.
“Our latest assessment is that our policy stance remains appropriate,” Tetangco reiterated.