Moody’s Analytics eyes April inflation at 7.3%

FILE: Farmers Market in Cubao, Quezon City remains crowded less than 24 hours before Christmas on Saturday (Dec. 24, 2022). Shoppers said they still have to compete their ingredients for the Noche Buena feast. (PNA photo by Robert Oswald P. Alfiler)

MANILA – Domestic inflation rate for April 2023 is expected to remain above-target at 7.3 percent, and an economist of Moody’s Analytics said this will continue to be a challenge for the Bangko Sentral ng Pilipinas (BSP).

The forecast is lower than the 7.6 percent inflation print last March but is higher than the government’s 2 to 4 percent target band.

Moody’s Analytics senior economist Katrina Ell said they “expect headline and core inflation (to have) remained heated in April.”

“Headline inflation is still above the BSP’s target and is being kept high on account of steep price growth for food items such as red onions, a staple in Filipino cuisine, and also electricity, which is included in the core CPI (consumer price index),” she said in a reply to questions from the Philippine News Agency.

Core inflation, which excludes volatile oil and food items, accelerated to 8 percent last March from the previous month’s 7.8 percent.

Ell said “demand-side pressures gathered steam, making a bad situation worse.”

She said “tourism is bouncing back, pushing up restaurant and accommodation charges in the process.”

“The next challenge for the BSP is to sustainably tame inflation. We expect BSP to take interest rates higher until inflation is close to its target of 2 to 4 percent,” she added.

The BSP has increased its key rates by a total of 425 basis points since May 2022, bringing the overnight reverse repurchase (RRP) rate to 6.25 percent.

The hike was made to help address the acceleration in inflation rate as prices of oil and other commodities in the international market rose last year due to the impact of the Russia-Ukraine conflict, among others.

Monetary authorities expect inflation to return to within-target levels by the last quarter of 2023, although inflation is seen to average at 6 percent this year.

The inflation rate in the first quarter this year stood at 8.3 percent, with the March level decelerating to 7.6 percent from 8.6 percent in the previous month.

It peaked last January so far when it hit a 14-year high of 8.7 percent.

The Philippine Statistics Authority (PSA) is scheduled to release the April 2023 inflation report on Friday.