at a gasoline station.
By Katherine K. Chan, Reporter
HIGHER FUEL, electricity, and rice prices, together with the peso’s weakness, likely pushed inflation to the fastest in around two years, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.
In its latest month-ahead inflation forecast, the BSP said inflation likely settled between 3.1% and three.9% in March, faster than the 1.8% clip a yr ago and a couple of.4% in February.
On the upper end of the forecast, inflation can have accelerated to its fastest pace in over two years or because the 4.1% in November 2023. It might also match the headline inflation logged in May 2024.
Meanwhile, at the underside end, inflation can be the fastest print in 19 months or because the 3.3% clip in August 2024.
The central bank said cheaper prices of vegetables, fish and meat likely tempered price pressures through the month, but rising costs of fuel, electricity and rice weighed on the headline print.
“Inflation risks have intensified with upward price pressures arising from the numerous increase in domestic petroleum prices, higher rice prices, increased electricity charges in Meralco-serviced areas, and depreciation of the peso,” it said in a press release.
Local pump prices have soared because the US and Israel launched attacks against Iran in late February.
In March, fuel retailers raised pump prices by as much as P43.50 a liter for gasoline, P67.35 per liter for diesel and P70.90 per liter for kerosene.
Meanwhile, Manila Electric Co. (Meralco) hiked electricity rates by 64.27 centavos per kilowatt-hour (kWh) to P13.8161 per kWh last month from P13.1734 per kWh in February. This meant households consuming 200 kWh monthly paid about P129 more of their electricity bill for March.
Rice prices also continued to climb in March, with the typical cost of local regular milled rice increasing by 5.8% to P48.69 a kilo within the second half of the month from P46.02 a yr earlier.
The value of well-milled rice jumped by 8.02% yr on yr to P56.68 a kilo, while the value of special rice climbed by an annual 3.79% to P64.07 a kilo.
Then again, the local currency likewise took a success from a robust dollar amid the Middle East war.
On Tuesday, the peso lost 5.8 centavos to shut at a brand new all-time low of P60.748 against the greenback from its previous record finish of P60.69 on Monday, Bankers Association of the Philippines data showed.
Michael Wan, a senior currency analyst at MUFG Global Markets Research, sees the local unit underperforming amid pressures from looming oil shortages and spillovers to other sectors on top of price shocks.
“We predict the following phase for Asian currencies could also be a shift towards concerns around growth and with that greater risk aversion in markets if the Iran conflict prolongs,” he said in a note on Tuesday. “It will likely mean growth sensitive and current account deficit in emerging market currencies will likely show greater magnitude of underperformance moving forward, including the likes of INR (Indian rupee), PHP (Philippine peso), IDR (Indonesian rupiah), and KRW (Korean won).”
In a March 30 note, Metropolitan Bank & Trust Co. (Metrobank) also said inflation will likely proceed to select up in the approaching months amid persisting oil risks from the continuing Middle East war.
It likewise expects the peso to stay weak within the near term as uncertainties surrounding the war proceed to draw safe-haven demand for the US dollar.
This will likely push the central bank to hike its policy rate before yearend to tame inflation, Metrobank added.
“Metrobank still sees continued upside oil risk, because the Strait of Hormuz, a critical transit point for global oil shipments, stays closed,” it said. “We also expect the Bangko Sentral ng Pilipinas to boost their policy rate this yr to combat rising inflation.”
Last week, the BSP maintained its policy rate at 4.25% in an off-cycle meeting because it noted that emerging inflation pressures are supply-driven, by which policy adjustments have little impact.
The BSP’s next policy review is on April 23.
Nonetheless, BSP Governor Eli M. Remolona, Jr. hinted that future policy decisions will hinge on second-round price effects, adding that a worst-case scenario of $200-a-barrel oil price will force them to tighten.
Global oil prices have been hovering around $100 a barrel in recent weeks. Brent crude futures went up about 2% to $114.98 per barrel on Tuesday, bringing total gains for the month to its highest ever at around 59%, Reuters reported.
The BSP said it would keep assessing the implications of the Middle East conflict on local inflation and economic activity.