Inflation risks rise as oil volatility intensifies
From AB Capital's The Opening Bell: Three Moves
Event
Analysts see Philippine headline inflation at 2.4% in February (vs 2.0% in Jan-26) with CPI pushed higher by electricity, oil, and key food items. At the same time, escalating US-Iran tensions have lifted global crude benchmarks, with Bloomberg Economics flagging US$80 as a base risk and US$108 under a Hormuz disruption scenario.
View
In our view, the macro risk lies less in geopolitical headlines and more in sustained oil price levels. Oil accounts for about 4.6% of CPI directly, roughly 9% including indirect effects. A move toward US$90 could add 0.3-0.5pp to inflation over succeeding quarters.
Catalyst
Key variables are Brent trajectory and peso stability. The BSP estimates that a 1% Php depreciation typically adds 0.036pp to headline CPI. Combined oil and FX pressures would raise the probability of delayed monetary easing.
Action
We believe investors should monitor inflation and currency trends for potential impacts on interest rate expectations and sectors sensitive to cost inflation (e.g., transport, consumer staples). A prolonged oil shock would likely weigh on consumer sentiment and could influence sector rotations within the local equity market.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
- Latest
