Economists’ inflation forecast diverges

Published by rudy Date posted on May 12, 2011

INFLATION will be more stable in the second quarter of the year given the price movements in recent months, according to First Metro Investment Corp. and University of Asia and the Pacific (FMIC-UA&P).

In a commentary, FMIC-UA&P said oil prices appear to have plateaued in April, adding that inflation will remain below 5 percent in the second quarter considering very stable rice and other food prices.

“Because of the inflation rate outcome in [the previous months], our expectation of a more stable inflation in second quarter 2011 has firmed up. This, coupled with the raising of the key policy rates and abundance in the Philippines’ rice stocks, give us reasons to believe that the inflation fears are overstated,” FMIC-UA&P said in the latest issue of The Market Call.

“Because of these, we maintain a below 5 percent average inflation in the first half of 2011 despite the festering MENA crisis,” FMIC-UA&P said.

Headline and core inflation rates have been stable and will likely remain muted for the rest of the semester, FMIC-UA&P said.

In a separate research note, Metropolitan Bank and Trust Co. however said the recent turnaround in prices was more of a temporary correction, adding that this easing would not really continue in the coming months.

Pauline Revillas, Metrobank research analyst, said concerns about the sustainability of the economic recovery may have raised doubts about commodity demand, and there has been some speculative activity that is in need of unwinding.

Although prices of some commodities have started to regain some ground, it is the renewed concerns over Greece’s debt that is weighing on the economic outlook and demand for commodities, she said.

“Indeed, based on the recent turn of events, it is still too early to say that consumers can now slowly loosen their belts as elevated prices could still be the theme of the year,” she added.

For the full year, Metrobank projects price movements to settle at 5.9 percent from an earlier assumption of 5.1 percent, taking into account the continued political unrest in the MENA region and its impact on oil and remittances.–LAILANY P. GOMEZ REPORTER, Manila Times

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