INFLATION in April likely accelerated further to 4.6 percent from 4.3 percent a month ago using the 2012 index, which may compel the Bangko Sentral ng Pilipinas to raise interest rates either by next month or during the June meeting, ING Bank Manila said Friday.
“The CPI data for April is expected to reveal a continued acceleration of inflation,” the bank said. Senior economist Joey Cuyegkeng projected a rise to 4.6 percent from 4.3 percent in March.
“While short-term rates in this economy are grinding higher, the BSP’s Governor Nestor Espenilla Jr. has also warned of a hike in the policy rate. The markets are now looking for a policy rate hike either at the May or June BSP meeting. We are reconsidering our view of stable policy this year, which was based on earlier signals of steady policy from the central bank,” it said.
The government is set to release the April inflation data in the next couple of days.
The bank earlier took note of the previous hawkish statements of Bangko Sentral Governor Nestor Espenilla Jr. in which he said that any tweak in the policy stance was “just a matter of time.”
Cuyegkeng said justifications for the possible rate hike would be the rising inflation that could lead to second-round effects such as demands for higher minimum wages and transport fares.
“A few tripartite regional wage boards have been conducting public hearings. Petitions for higher minimum fares are under consideration by the regulator,” he said.
“We believe that modest second-round effects are already incorporated in BSP’s inflation forecast. BSP forecasts a return to the target range over the policy horizon of by early 2019 with its 3 percent 2019 inflation outlook from 2018 forecast of 3.9 percent,” Cuyegkeng said.