Inflation easing in April; BSP pausing next month – analysts
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Loading... - Abe Dalisay
- 02 May 2023
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Analysts expect the central bank will pause its policy rate hikes this month due to an anticipated lower inflation for the month of April amid oil-related rollbacks and lower prices of selected food items.
Moody’s Analytics in its latest review is projecting Philippine April consumer price index (CPI) to decelerate to 7.3 percent versus March’s 7.6 percent.
Security Bank Corp. chief economist Robert Dan Roces, meanwhile, is also forecasting April CPI to drop down below seven percent at 6.8 percent. The bank’s forecast range is 6.5 percent to 7.1 percent. The government will release the April inflation number on May 5.
Roces said the month-on-month CPI “may likely be flat or slightly negative” based on downside pressures such as lower electricity rates, LPG price rollbacks, and declining prices of fish and vegetables. The upside pressures will come from the peso depreciation, higher petroleum prices, upward price movements in rice and meat prices, he added.
Because of the expected lower April inflation, Roces said this will convince the Bangko Sentral ng Pilipinas (BSP) to take a break from its nine straight policy rate hikes.
“The BSP will consider the risks from global crude’s price volatility near-term and El Nino’s risks in the second half of the year,” he said, and this will make the BSP “to hold steady when it meets in May with disinflation projected to get more pronounced.”
The exchange rate, with the peso holding steady versus the US dollar lately at P55, is relatively stable.
“USD/PHP remains confined to a range with the local policy rate remaining above the US Fed’s (Federal Reserve),” said Roces.
The BSP’s Monetary Board since May 19, 2022 has raised the benchmark rate by a cumulative 425 basis points (bps) to 6.25 percent to keep a decent interest rate differential, thus preventing the peso from further depreciating vis-à-vis the US dollar.
BSP Governor Felipe M. Medalla has already signaled to the market that if April CPI proves to be the third consecutive negative inflation month-on-month, then the Monetary Board could be convinced to pause its policy rate increases when next it meets on May 18 for its monetary policy decision.
For its part, the Metrobank-owned First Metro Investment Corp. (FMIC) and its research partner the University of Asia and the Pacific (UA&P) said they still expect the BSP to adjust the key rate higher on May 18 by 25 bps.
“We do not see a decline in actual CPI in April and May (so) BSP will likely proceed with raising its policy rates by 25 bps in its May meeting. However, we expect a pause thereafter,” FMIC-UA&P said in its latest “Market Call” report. READ MORE…
