ctober inflation may shoot up to 8% — Metrobank

Rising oil prices brought by the continuing tensions in Libya, which sits on the largest oil reserves in Africa, may push the Philippine inflation to as high as 8 percent by October, a Metrobank study has showed.

Marc Bautista, Metrobank research head, said the bank’s latest inflation forecast for October was higher than its previous forecast of 7 percent.

National Statistics Office records showed that February inflation accelerated to 4.3 percent, exceeding the Bangko Sentral ng Pilipinas’ forecast of between 3 percent and 4.1 percent.

With this surprising movement, “[o]ur trend forecast now shows a higher curve than the initial one. The inflation numbers we were looking at before accelerated and moved forward,” Bautista said.

Metropolitan Bank and Trust Co. pointed out that a higher curve is hard to dismiss since the spike in February could not be blamed to the unrest in Libya.

Bautista said the spreading of unrest into the Organization of Petroleum Exporting Countries has certainly spooked the market more than the actual conflict in the South African country.

He warned that the higher inflation rate due to the turmoil in the Middle East and South Africa “will eventually feed into the inflation figures of the Philippines.”

Tweaking policy rates

Moreover, the analyst said the policy-setting Monetary Board will likely tweak its key rates as early as March 24, the next meeting of the seven-man team.

“Our take is that it will raise rates no later than May, perhaps even earlier if the March or April inflation figure shoots up further and breaches the annual band of 5 percent,” Bautista said.

Within this year, the central bank may raise its policy rates by 50 basis points, and another 50 basis points in the following year, according to Metrobank.

Should inflation accelerate even faster, Metrobank believes that the policy rates could be adjusted by 75 basis points this year and by as much as 50 basis points in the next.

The Monetary Board has pegged the overnight borrowing and lending rates at 4 percent and 6 percent, respectively, since July 2009. — JE, GMA News