April inflation seen breaching 4 percent target

MANILA, Philippines — Inflation likely picked up and breached the four percent upper target for the first time in five months in April, which will prompt the Bangko Sentral ng Pilipinas (BSP) to keep its hawkish stance, a poll of economists showed.

UnionBank chief economist Ruben Carlo Asuncion said April inflation may have quickened to 4.5 percent, from 3.7 percent in March, but still slower than the 6.6 percent print in the same month last year.

“We are expecting a 4.5 percent (inflation print) for April due mainly to the impact of El Niño and volatility from global oil prices,” he said. “We think that the Monetary Board will not move and will maintain the current interest rate levels.”

If realized, April inflation would be within the 3.5 to 4.3 percent monthly forecast of the BSP. It would also mark the third straight month that inflation accelerated on a monthly basis.

Inflation averaged 3.3 percent in the first quarter after picking up gradually from a three-year low of 2.8 percent last January.

The Philippine Statistics Authority (PSA) is scheduled to release the April consumer price index (CPI) data tomorrow.

Alvin Arogo, economist at Philippine National Bank (PNB), said inflation may hit 4.2 percent in April due to unfavorable base effects and sustained price increases in key food commodities such as rice and meat.

“A faster print, especially above the BSP’s target, will strengthen the case for a sustained policy rate pause in May. For the full year 2024, our inflation forecast is four percent,” he said.

Pantheon Macroeconomics emerging Asia economist Miguel Chanco said he expects inflation to rise further to 4.1 percent in April, as food inflation is seen to reach over 6.5 percent.

“But this should be the peak, as food-price base effects will turn favorable from May onwards; our average forecast for inflation this year currently stands at 3.4 percent,” he said, adding that the BSP would keep its hawkish rhetoric, but there would be no action on interest rates.

ING Bank Manila senior economist Nicholas Antonio Mapa said rice and transport inflation would likely be the main driver for April CPI, which is seen at 4.1 percent.

“We expect rice inflation to drive headline inflation above target for the next two months. However we could see an inflation dip by August to bring full year inflation to 3.8 percent on average for the year,” he said.

Meanwhile, Makoto Tsuchiya, economist at Oxford Economics, said inflation could still stay below four percent at 3.9 percent in April.

“We estimate food price level broadly remained unchanged during the month. Although rice prices remained elevated, other major food prices, including meat, fish, and fruits, likely declined. For the whole year, we expect CPI (growth) to average 3.6 percent,” he said.

He also said the BSP would likely stand pat at its meeting on May 16 amid lingering inflationary risks and the recent peso depreciation against the dollar.

“We also pushed back our first rate cut forecast to fourth quarter from the second quarter previously, given the changes to our US Fed rate call, expecting the first cut to come in September,” Tsuchiya said.

Moody’s Analytics economist Sarah Tan also sees April inflation at 3.9 percent as the dry spell from El Niño continues to take a toll on crop yields.

“Even if inflation sizzles slightly above the four percent mark, it is likely that the BSP will still decide to hold the policy rate steady as they meet on May 16,” Tan said.

“The odds are low for the tightening cycle to resume,” she said.