March inflation may pick up amid high food prices

Inflation likely accelerated for the second straight month in March, mainly driven by high rice prices, prompting the Bangko Sentral ng Pilipinas (BSP) to keep borrowing costs unchanged at its next policy review in April, analysts said.

This developed as Finance Secretary and Monetary Board member Ralph Recto warned that inflation would remain bumpy and likely to breach the central bank’s two to four percent target range at some point.

Economist Makoto Tsuchiya of Oxford Economics said headline inflation may pick up to 3.5 percent in March from February’s 3.4 percent due to unfavorable base effects.

“Possible upside risks to our forecast include higher food prices including rice whose price remains elevated, as well as meat which shows a rising trend,” he said.

BSP Governor Eli Remolona Jr. said inflation would likely quicken to 3.9 percent in March. If realized, it would mark the second straight month that inflation went up on a monthly basis.

Still, inflation would be significantly lower than the 7.6 percent last year. It would also be the fourth straight month that the consumer price index (CPI) stayed within the central bank’s two to four percent target.

However, National Economic and Development Authority Secretary Arsenio Balisacan said inflation would likely slow down in March, especially as the proposed minimum wage adjustments have yet to be enacted into law.

“We think the BSP will remain on hold at the April meeting, given the inflation path remains volatile and risks are tilted to the upside. The first cut will likely come in June, after the US Fed starts to cut and there’s more assurance on the steady disinflation path,” Tsuchiya said.