A rate hike in May? (3)

PHILIPPINES - In Brief 05 Apr 2018 by Romeo Bernardo

Headline inflation climbed further to 4.3% in March (4.8% under the old series) from 3.8% in February and 3.4% in January. The latest inflation print is slightly above the midpoint of the BSP’s 3.8-4.6% forecast for the month and what most analysts expected. On a seasonally-adjusted basis, monthly inflation remained elevated at 0.6%, supporting our view of an imminent policy rate hike. The release of March inflation data coincided with renewed noise over depleted government rice stocks and the need for more expensive commercial rice to fill the supply gap, risking additional pressure on domestic prices. Under the new CPI series (2012=100), the share of rice is equivalent to 9.6% of the basket, higher than the 8.9% share under the previous series. Given these developments, we are adjusting our inflation forecast for the year from 4.2% to 4.4% (new series). We continue to expect the headline inflation to peak slightly above 5% in 3Q18.

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