Rate rises likely for Philippines as inflation grips
MANILA – ANZ Bank is tipping Bangko Sentral ng Pilipinas (BSP) to raise its policy rate by a cumulative 50 basis points this year, starting from the third quarter, and by 75 basis points in 2018.
The bank says core inflation remained steady in April, and that demand-pull price pressures are becoming more entrenched. “Inflation expectations are also likely to rise as debates on the first package of tax reforms progress.”
ANZ says that, despite a steady print in April’s headline inflation at 3.4% y/y, underlying price pressures are strong. Monthly gains in food and transport prices contributed significantly to the overall annual change.
“However, more important is that core inflation has continued to firm up, rising 3.0% y/y during the month,” ANZ says, pointing out that nflation has been in the upper half of the central bank’s 2-4% target range for the past three months.
It says Government estimates that headline inflation could rise by an additional 1.5% within the first 12 months of implementation of taxation reforms could threaten the central bank’s inflation target.