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UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting evaluation the newest inflation figures within the Philippines.
Key Takeaways
“Headline inflation accelerated for the third straight month to five.4% y/y in Might (from 4.9% in Apr), exceeding the 5.0% degree for the primary time since Dec 2018 and marking the very best charge since Nov 2018. The studying matched our estimate and Bloomberg consensus. It was once more predominantly pushed by greater meals and transport prices amid persistent weak spot in Peso (PHP).”
“Trying forward, inflation is poised to remain above 5.0% for the remainder of the yr and into 1Q23 because the home financial system continues to reopen, exterior provide shocks persist, and better minimal wages additional intensify second-round results on inflation. This may result in a better inflation charge of 5.0% for all the yr of 2022 (in comparison with our earlier forecast of 4.5%, BSP est: 4.6%, 2021: 3.9%) and 4.0% for 2023 (vs our earlier projection of three.5%, BSP est: 3.9%).”
“The newest robust inflation outturn in Might and rising inflation expectations would validate a second 25bps hike within the in a single day reverse repurchase (RRP) charge by Bangko Sentral ng Pilipinas (BSP) on the upcoming financial coverage assembly on 23 Jun. The continued enchancment in home financial actions, an anticipated 50bps hike within the US Fed Funds charge in Jun and Jul, and different central banks’ quicker coverage normalisation path are additionally strengthening the case for back-to-back BSP charge will increase and shifting in close to lockstep with US charges. Therefore, we revise our BSP charge hike name to 25bps in each remaining assembly of this yr (vs +25bps every in 3Q22 and 4Q22 beforehand), bringing the RRP charge to three.50% by finish of 2022.”
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