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STILL BROADENING PRICE <\/span>pressures despite slowing head<\/span>line inflation may warrant two <\/span>more consecutive rate hikes by the Bangko Sentral ng Pilipinas (BSP), <\/span>Deutsche Bank Research said.<\/span><\/p>\n In a report dated July 10, the Germany-based think tank said it still sees the central bank delivering a 25-basis-point (bp) rate hike at each of its next two policy meetings on Aug. 27 and Oct. 22.<\/p>\n In June, headline inflation eased to a three-month low of 6.4%, while core inflation, which strips out volatile food and fuel prices, quickened for a sixth straight month to a near three-year high of 4.4%.<\/p>\n \u201cMeasures of underlying inflation show that the strategy of broadening price pressures remains to be underway,\u201d Deutsche Bank Research economist Junjie Huang said in a separate report released on July 7. \u201cOur monetary policy outlook stays unchanged as we expect this process to proceed in the approaching months.\u201d<\/p>\n If his projections hold true, the BSP\u2019s key policy rate will climb to five.25% by October. This will likely be the best in one-and-a-half years or for the reason that 5.5% in April last yr and likewise match the speed set in June 2025.<\/p>\n The Monetary Board began its tightening cycle with a quarter-point hike in April and later delivered one other 25-bp increase in June resulting from increasing inflationary pressures from the energy shocks triggered by the Middle East war.<\/p>\n This has to this point brought the benchmark rate to 4.75%, with monetary officials leaving the door open for further measured hikes.<\/p>\n BSP Governor Eli M. Remolona, Jr. has said that they still have space for a 3rd straight 25-bp rate hike as he sees the economy gaining some momentum by the second half of the yr.<\/p>\n The central bank has also reiterated its hawkish signals, noting that they might proceed to pursue further monetary motion to bring inflation back to their 3% goal.\u00a0 \u00a0<\/span><\/p>\n Deutsche Bank now sees the headline print settling at 6% this yr, slower than its previous 6.2% estimate. Nevertheless, it left its inflation forecast for next yr unchanged at 4.1%.<\/p>\n \u201cWhile headline inflation has come down prior to now two months, second-round effects are still working their way through the economy, in our view, as seen within the measures of underlying inflation,\u201d Mr. Huang said. <\/span><\/p>\n He also flagged price risks from the looming El Ni\u00f1o event amid lingering pressures on food inflation, in addition to from the peso\u2019s fragile standing versus the dollar.\u00a0<\/span><\/p>\n \u201cFurthermore, we imagine that the upside risk from El Ni\u00f1o and food price inflation has not been fully priced in, while USD (US dollar) strength or rates repricing could keep the peso and imported cost inflation under pressure,\u201d he added. <\/span><\/p>\n The Philippines may encounter \u201cstrong\u201d El Ni\u00f1o conditions by September to November, with a potentially stronger phenomenon to come back between October and January next yr, in line with the state weather bureau.<\/p>\n If realized, the local agricultural sector will likely take successful from extreme hot weather, which could push food prices up nationwide.<\/p>\n Also, the continuing war between the US, Israel, and Iran continues to weigh on the peso, averaging above the P61-per-dollar mark for 2 straight months or since May. <\/span><\/p>\n WAGE HIKE IMPACT Metrobank Research Officer Marian Monette Florendo-Obias said this record-high hike could stoke inflation via second-round effects as businesses may opt to extend their prices to fulfill the brand new minimum wage. <\/span><\/p>\n \u201cHigher minimum wages raise labor costs for businesses, particularly for labor-intensive firms within the services sector. As wage expenses rise, profits could also be squeezed and businesses could also be forced to pass on a part of the prices to consumers through higher prices,\u201d she said.<\/p>\n \u201cThis can end in higher inflation for goods and services heavily depending on labor inputs. It’s then reasonable to expect upward pressure on over<\/span>all inflation figures,\u201d she added.<\/span><\/p>\n In response to Ms. Florendo-Obias, rising prices could also dampen demand and result in a rather weaker job market as businesses cut employees\u2019 hours or reduce <\/span>hiring to offset increasing labor costs. <\/span><\/p>\n \u201cNow this might have an overall negative impact on economic growth, with the federal government estimating that a P100 nationwide minimum wage increase could reduce GDP (gross domestic product) growth by around <\/span>0.4 percentage point,\u201d she added.<\/span><\/p>\n Philippine GDP growth slumped to a post-pandemic low of two.8% in the primary quarter of the yr.<\/p>\n Nevertheless, all these spillover effects only pose minimal threat to the economy because the wage hike is ready to affect merely 2% of the country\u2019s labor force, Ms. Florendo-Obias noted.<\/p>\n \u201cInflation may rise; employment numbers may take successful; and growth may decelerate,\u201d she said. \u201cNevertheless, the general impact on the broader economy is anticipated to stay manageable, particularly if accompanied by complementary government policies.\u201d<\/p>\n The Department of Labor and Employment announced late last month that it can implement a dual tranche P85 increase within the minimum wage within the National Capital Region (NCR).<\/p>\n Starting July 25, the minimum wage within the NCR will increase by P60 to P755 for nonagricultural employees and to P718 for agricultural employees and employees of retail, service, and small manufacturing establishments.<\/p>\n The second tranche of the wage hike or P25 will take effect in January 2027. \u2014 Katherine K. Chan<\/b><\/p>\n<\/p><\/div>\n <\/p>\n","protected":false},"excerpt":{"rendered":" A lady buys food items at a supermarket in Quezon City, March 4, 2022. \u2014 PHILIPPINE STAR\/ MICHAEL VARCAS STILL BROADENING PRICE pressures despite slowing headline inflation may warrant two more consecutive rate hikes by the Bangko Sentral ng Pilipinas (BSP), Deutsche Bank Research said. In a report dated July 10, the Germany-based think tank […]<\/p>\n","protected":false},"author":1,"featured_media":366101,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[30454,17554,6229,822],"class_list":["post-366100","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business","tag-25bp","tag-hikes","tag-rate","tag-year"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t
<\/b>In a separate commentary, Metropolitan Bank and Trust Co. (Metrobank) noted that the upcoming minimum wage hike could also add pressures to the country\u2019s <\/span>inflation, growth and employment. <\/span><\/p>\n