Inflation Preview: Subdued price rise continues 

Consumer-price rise remained subdued this month, opening the door for monetary authorities to resume interest-rate cuts to cushion economic risks.

Metrobank forecasts annual headline inflation in March to match last month’s pace of 2.1%. This translates to a 0.1% month-on-month (MoM) increase.

Food basket

This month, the prices of plant-based commodities such as rice, vegetables and fruits continue to decrease relative to the previous month. That’s thanks to improved weather conditions and the continued impact of price-control policies on rice.

While the government enforced a maximum retail price for pork from March 10, its price along with that of its alternative – beef – continues to accelerate this month. The country grapples with the effects of the African Swine Fever (ASF). Meanwhile, fish prices rose as demand increases during the Lenten season.

As rice, vegetables and fruits account for a larger portion of the commodity basket, their month-on-month decline in costs offsets the increase in meat and fish prices.

Back-to-back rollbacks

Motorists experienced oil price rollbacks for three consecutive weeks this month, driven by high commercial stockpiles in the US and the surprise production hike in OPEC+ crude output.

Despite the oil price hike in the last week of March, we still expect to see deflation in oil for the month.

Higher electricity rates in the metro

Metro Manila electricity costs continue on an upward trend MoM after Manila Electric Co. raised rates in March. The upward adjustment is due to higher transmission charges from the National Grid Corporation (NGCP) and the increase in Feed-in tariff Allowance following the Energy Regulatory Commission’s (ERC) directive.

On the other hand, other large electric distribution companies in the country like the Visayan Electric and the Davao Light reduced electricity rates in March.

Metrobank’s take  

We anticipate inflation this March to remain near the lower-end of the 2%-4% target of the Bangko Sentral ng Pilipinas (BSP), as we see deflation in major commodity items including rice and oil.

Target-consistent inflation, together with the less volatile peso, provides the BSP more urgency to resume lowering policy rates at the next Monetary Board meeting on April 10, just less than a week after the release of the March inflation print.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.) 

MARIAN MONETTE FLORENDO is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. Her academic background is in Mathematics and Economics. She loves solving puzzles and watching mystery movies.