March inflation decelerates

PHILIPPINES - In Brief 05 Apr 2023 by Romeo Bernardo

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The headline inflation rate was reported at 7.6% in March, down from 8.6% in February and is below the median analyst estimate of 8.1%. On a seasonally-adjusted basis, the price level was unchanged from a month ago, due largely to a 14% drop in the item “vegetables, tubers, cooking bananas and pulses.” Supply of onions in the local market has been increasing since prices peaked in January. Although the headline rate fell within the BSP’s forecast of 7.4%-8.2% for March, core inflation climbed further from 7.8% to 8%, revealing continuing pressures on the demand side. The sharper than expected disinflation in March mainly points to the importance of supply-side factors in controlling domestic inflation and does not necessarily mean the inflation problem is over. Risks to the outlook include reported increases in prices of meat (pork and chicken),[1] projected power supply shortages in the summer months, and most recently, OPEC’s decision to cut oil production due to expected global growth slowdown which may see oil prices staying high. Added to these are risks of higher domestic wage and transport fare adjustments, all of which combined could keep inflation expectations elevated. The next Monetary Board meeting is in May. Should April inflation continue to trend down and risks subside, we expect authorities to pause policy tightening. [1] https://www.philstar.com/headlines/2023/03/30/2255571/after-pork-chicken-prices-up