April inflation seen topping 5%, raising odds of BSP rate hike

RISING OIL PRICES and second-round effects could push inflation above 5% this month, increasing the odds of a 25-basis-point (bp) rate hike by the Bangko Sentral ng Pilipinas (BSP), according to the University of Asia and the Pacific (UA&P).

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“Inflation will likely accelerate above 5% starting April, and the BSP has recently taken a more hawkish stance, which we think is uncalled for with the weak economy and job growth,” the UA&P said in its April Market Call.

“Oil prices are expected to stabilize below $90 a barrel as tensions ease, but inflation could rise above 5% from April due to second-round effects,” it added.

‘The UARP said it maintained its 3.1% first-quarter gross domestic product (GDP) forecast, despite strong employment and a rebound in National Government spending in February.

“The Middle East war is dampening Philippine growth, especially with weakened global demand and inflation exceeding BSP targets in the coming months,” it said.

“Government spending and employment may pick up, but high inflation and interest rates will limit gains,” it added.

However, it said it expects an economic recovery in the second half of the year as government spending accelerates once the Middle East conflict nears resolution.