Inflation risks rise as oil shock feeds through
From AB Capital's The Opening Bell: Three Moves
Event
March inflation is seen accelerating to around 3.8%, near the upper end of BSP’s forecast, driven by sharp fuel price increases, higher rice and electricity costs, and peso weakness. Some analysts see potential breach of the 2-4% target band.
View
In our view, inflation is entering a more persistent phase as energy shocks transmit into transport, food, and utilities. The reversal of transport deflation and emerging second-round effects suggest broader price pressures beyond initial supply-side drivers.
Catalyst
Key variables include oil prices, FX stability, and wage or tariff adjustments. If Brent sustains above US$110 or trends higher, inflation could exceed 4% in the near term. A move toward US$200 would likely trigger policy tightening despite growth concerns.
Action
We think BSP will likely hold near term but risks are shifting toward tightening. Maintain a defensive stance, favoring sectors with pricing power. Monitor inflation expectations and second-round effects closely as these will determine timing and magnitude of policy response.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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