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Inflation is likely to have accelerated in April

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Analyst estimates of inflation in April

By means of Luisa Maria Jacinta C. Jocson, News reporter

HEADLINE INFLATION May Yields accelerated for a third straight month in April and may have exceeded the Philippine central bank’s target of 2-4%, analysts said.

a Business a poll of 16 analysts in April yielded an average estimate of 4.1% for the consumer price index (CPI), within the 3.5-4.3% forecast by the Bangko Sentral ng Pilipinas (BSP).

If realized, April inflation would be faster than March’s 3.7%, but slower than the 6.6% a year ago.

This would also reach the target bandwidth of 2-4% for the Ffor the first time since the 4.1% pressure in November 2023.

April would also mark the third month in a rowFplucked up monthly.

The Philippine Statistics Authority (PSA) will release April CPI data on May 7.

“I expect a further increase in turnoverFto 4.1% in April, exceeding the 4% upper limit of the BSP target for the first time in five months,” said Miguel Chanco, Pantheon’s chief emerging Asia economist.

“The positive side, however, is that this further upward trend should mainly be due to the unfavorable base of food pricesFfects – a technical aspect – rather than a real intensiFication of pressure on food prices,” he added.

Emilio S. Neri Jr., chief economist of the Bank of the Philippine Islands, said the monthly change in food prices appears to have “stabilized” in April.

“But any noticeable increase in headlines year-over-year in April versus March is more likely to come from unfavorable fundamentals.Ffects, something we expect to continue in May and June,” Mr Neri said.

Analysts noted that food was coming inFlation remained the main driver of inFlat.

ING Bank NV Manila Senior Economist Nicholas Antonio T. Mapa said rice inFAnnual growth is expected to exceed 24% due to “tight supply conditions” in April.

Rice rises in it in MarchFProduction accelerated to 24.4%, the fastest print since 24.6% in February 2009.

At the end of April, the price of local well-milled rice averaged P48-P55 per kilo, compared with P39-P46 a year ago, Department of Agriculture data show. A kilo of plain white rice cost an average of P50, compared to P34-P42 a year ago.

Analysts also noted AprilFlation will againFView the impact of the El Niño weather pattern.

“The main upward pressure comes from rising food prices, while the El Niño dry spell continues to take its toll on crop yields. In particular, rice and pork are the two foods that have suFcaused severe supply-side disruptions,” said Moody’s Analytics economist Sarah Tan in an email.

As of April 23, agricultural damage due to the El Niño has reached P4.39 billion. Rice was the mostFcontaminated harvest, accounting for 62% of total agricultural damage, equivalent to 2.71 billion euros.

“Private transport will also contribute to thisFin April, after several weeks of price increases, with prices only declining slightly in the last week of April,” Mr Mapa said.

For the month of April, pump price adjustments amounted to a net increase of P2.25 per liter for gasoline and P0.50 per liter for diesel. Kerosene prices declined net by P0.80 per liter.

“Sequentially, fuel prices likely moved higher, especially towards the end of the month, due to a temporary increase in global oil prices,” Makoto Tsuchiya, an economist at Oxford Economics, said in an email.

OUTLOOK
InFGrowth could continue to accelerate through the remainder of the second quarter before easing in the latter part of the year.

“We expect the headlines to come inFThe peak will be in the order of at least 5% annualized in April-May, consistent with broad food intakeFInflation peaked at an annual rate of 6.2% in April before declining to 5.5% in July,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc.

HSBC economist for ASEAN (Association of Southeast Asian Nations) Aris D. Dacanay said he expectsFreturn to within the BSP’s 2-4% target range once the unfavorable base eFcarry defects, etcFf in the third quarter.

InsideFAs the situation is likely to remain high, the BSP is expected to extend its policy pause at its next meeting.

“We believe that the BSP will remain seated at the upcoming meeting considering its absenceFlationary risks and recent currency movements,” said Mr. Tsuchiya.

The peso returned to the P57 level this month. The BSP has said this is due to the strong US dollar and not a weak peso amid the Middle East scamsFlic.

“An accelerated push, especially above the BSP target, will strengthen the case for a sustained policy rate pause in May,” Philippine National Bank (PNB) economist Alvin Joseph A. Arogo said.

The Monetary Board held its fourth consecutive meeting in April and kept the benchmark interest rate at a 17-year high of 6.5%.

From May 2022 to October 2023, the BSP increased borrowing costs by 450 basis points (bps).

The Monetary Board will review the policy on May 16.

Weaker-than-expected gross domestic product (GDP) growth could also prompt the BSP to leave its policy rate unchanged.

“We suspect the case for a continued pause will be strengthened by the first quarter GDP data, which we expect will fall short of expectations,” Mr Chanco added.

The government is targeting growth of 6 to 7% this year. First quarter GDP data will be published on May 9.

Mr Tsuchiya said he expects the BSP to make its first rate cut in the fourth quarter.

“As long as the impact of El Niño on the food CPI has not subsided, BSP will not hesitate to continue its aggressive pause (thus postponing any BSP rate cuts) or emphasize that risks to the outlook remain positive are,” said Mr. Asunción.

There is also less chance of a rate hike, Ms Tan said.

“There is little chance that the tightening cycle will resume. BSP is also aware that inFIn the second quarter of this year, they may creep above the upper limit of their target range. Meanwhile, it is not yet time for the BSP to start monetary easing, especially as the US Federal Reserve appears to be delaying its first rate cut,” she added.

The Federal Reserve held its Fed Funds rates steady at its meeting from April 30 to May 1.