Inflation will likely peak at 4.5% over the next two months as it reels from the impact of higher crude prices and new taxes imposed on basic goods, which will likely trigger a policy rate hike from the central bank by March.
Analysts at First Metro Investment Corp. (FMIC) said they expect inflation to pick up by March and April at 4.5%, before slowing to back to within the 2-4% target range set by the Bangko Sentral ng Pilipinas.
“[W]e think that inflation will accelerate in H1 but will start to decelerate thereafter as food and crude oil prices normalize,” the research firm said in its monthly report published Monday, Feb. 26.
Prices shot up by 4% in January, beating market expectations and logging the fastest in over three years.
BSP Governor Nestor A. Espenilla, Jr. has attributed the price spike to the implementation of the Tax Reform for Acceleration and Inclusion (TRAIN) Act, as well as to rising oil and food prices. However, the central bank chief said the impact of tax reform is likely temporary and would eventually “stabilize.” — Melissa Luz T. Lopez