Double pay: Inflation set to rise in the Philippines

Surging loan growth and an increase in the repo rate will mean money supply will rise along with inflation.

Taking into account external headwinds and a softening of consumer confidence, we see downside risks to our 5.6% average inflation forecast for 2011, says OCBC.

Here’s more from OCBC:

We will look to revise the figure once the central bank releases rebased numbers next week. Despite the dovish notes sounded by the central bank (BSP), we are not convinced that inflation has already been tamed. Indeed, although the sequential increase in CPI should ease in the coming months, we are still worried about the potential uptick in core inflation towards the end of the year.

Moreover, credit growth has been accelerating, reaching a 25-month high of 18% (YoY) in April and we believe that this will show up in increased money supply (M3) growth, stoking inflationary pressures down the line.

We are happy to maintain our call of two more 25bps rate hike by the end of the year, taking the reverse repo rate to 5.00% (from 4.50% currently). That said, we caution that risks to our projection are tilted to the downside. Should the current ‘soft patch’ prove to be more protracted than anticipated, growth issues would dominate again.

Moreover, the BSP appears to be more concerned about excess liquidity and we do not rule out another 100bps hike in the reserve requirement ratio to the pre-crisis high of 21% within the next six months.

Also Read

Updated MOU strengthens SG-Malaysia pharmaceutical ties

Singapore Companies Eye Vietnam to Navigate Manufacturing Shifts, Green Transition, and the AI Revolution

Since you're here...

...there are many ways you can work with us to advertise your company and connect to your customers. Our team can help you dight and create an advertising campaign, in print and digital, on this website and in print magazine.

We can also organize a real life or digital event for you and find thought leader speakers as well as industry leaders, who could be your potential partners, to join the event. We also run some awards programmes which give you an opportunity to be recognized for your achievements during the year and you can join this as a participant or a sponsor.

Let us help you drive your business forward with a good partnership!

I want to download the media kit