April inflation quickened to 4.9%

PHILIPPINES - In Brief 05 May 2022 by Romeo Bernardo

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The headline inflation rate reached 4.9% in April, up from 4% in March.On a month-on-month seasonality adjusted basis, inflation continued to rise briskly at 1% for the second straight month.Increases in food and fuel prices are still the main drivers, with the latter pushing up consumers’ electricity bills.Although average international crude oil prices for the month have slipped, they remain elevated with domestic pump prices still rising.Food inflation across various categories have also exhibited upticks. The April inflation rate fell within but was close to the upper end of the BSP’s 4.2%-5% inflation forecast for the month.With global energy markets still on edge following Russia’s invasion of Ukraine and resulting western sanctions, we expect continuing pressures on domestic inflation as price adjustments, including from a weaker peso, ripple through supply chains.The change in government in the middle of the year makes it difficult to assess the likelihood of adjustments in regulated sectors, e.g., transport fares and minimum wages, and second round impacts from these sources. For now, we are penciling in higher 5.5% inflation forecast for this year, although we still expect the headline rate to fall back to BSP’s 2-4% target in 2023.BSP Governor Benjamin Diokno had earlier signaled a rate hike in June.Given the US Fed’s increasingly hawkish stance, seen in its latest 50bp rate hike, we would not be surprised if local monetary authorities acted sooner.The next Monetary Board meeting is on May 19 when any decision will be informed by data on Q1 GDP performance and election results.