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Philippines headline inflation is expected to remain within the Bangko Sentral ng Pilipinas’ (BSP) targeted range of 2-4 percent in both 2017 as well as 2018. However, core inflation, which has been continuously increasing over the last 12 months, is unlikely to see any let-up, according to recent forecast reports from Danske Bank.
At 3.4 percent y/y, March headline inflation came in as expected. Food prices were generally lower. This was partially offset by higher electricity tariffs in all regions. While transport costs are still posting annual increases, they are nearing their peak.
Above-trend growth in household spending coupled with the government’s renewed push to deliver infrastructure projects imply a continuation of strong domestic demand and upward price pressures, by implication.
"Though we believe that headline inflation may be close to peaking, core inflation is likely to continue rising given the strength in domestic demand. We stand by our view that, starting in Q3 2017, the central bank will raise its policy rate by a cumulative 50 basis points this year," the report commented.
