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Business

Inflation seen losing steam by 4th quarter

Lawrence Agcaoili - The Philippine Star
Inflation seen losing steam by 4th quarter
Vegetables stands in Marikina public Market buyers dismay the price of the vegetables increased due to weeks of continuously rain in Northern Luzon that cause of lack of supply in Metro Manila (August 17, 2021).
STAR / Boy Santos, File

MANILA, Philippines — Inflation is likely to lose steam in the fourth quarter of the year as global oil prices ease and the consumer price index (CPI) for housing, water, electricity, gas and other fuels decline, according to Moody’s Analytics.

The research arm of the Moody’s Group said that the Philippines and other countries in Asia remain susceptible to the supply pressures coming through from supply-chain snags and higher commodity prices from Russia’s invasion of Ukraine.

Moody’s Analytics also cited the strict COVID management strategy in China that makes production and transportation of key inputs increasingly difficult.

Inflation in the Philippines averaged 4.7 percent in the first seven months, exceeding the two to four percent target set by the Bangko Sentral ng Pilipinas (BSP).

The rise in consumer prices quickened to 6.4 percent in July, the highest since the 6.9 percent recorded in October 2018, from 6.1 percent in June. A sugar shortage caused sugar prices to surge, with sweetener, confectionery and dessert prices up by 17.6 percent year-on-year.

While the food and non-alcoholic beverages segment, as well as transport, served as the main drivers of inflation last month, Moody’s Analytics said the price of Brent crude oil fell below $100 per barrel and the CPI for housing, water, electricity, gas and other fuels eased by 5.7 percent.

According to Moody’s Analytics, falling oil prices would take some heat out of transport prices.

“It is too early to judge whether inflation has reached its peak, but inflation is likely to lose steam in the fourth quarter,” Moody’s Analytics said.

BSP Governor Felipe Medalla earlier said the central bank would likely raise interest rates by 25 to 50 basis points during its rate-setting meeting schedule on Aug. 18.

As the inflation outturn in July hit the upper end of the BSP’s 5.6 to 6.4 percent forecast, Medalla said that the probability of a 50-basis-point hike increased.

Former Finance Undersecretary Romeo Bernardo, country analyst at New York-based GlobalSource Partners, said the BSP chief already signaled to raise policy rates by either by 25 or 50 basis points next week amid the aggressive rate hikes by the US Federal Reserve.

“The latest inflation print as well as the still aggressive tone of the US Fed officials put the odds in favor of a 50-basis-point hike,” Bernardo said.

The think tank sees inflation averaging 5.5 percent this year, remaining above six percent in the coming months.

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