Prolonged Iran war may push Philippine inflation past 8% — HSBC

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HEADLINE INFLATION could surge past 8% this year if the Middle East conflict remains unresolved, which could push the Monetary Board to hike policy rates to up to 6%, the Hongkong…

HEADLINE INFLATION could surge past 8% this year if the Middle East conflict remains unresolved, which could push the Monetary Board to hike policy rates to up to 6%, the Hongkong and Shanghai Banking Corp. Ltd. (HSBC) said.

“We forecast full-year inflation to be 6.3%, where the peak will be in the fourth quarter at 8.1%, driven not mostly by energy but by food,” HSBC Senior ASEAN (Association of Southeast Asian Nations) Economist Aris D. Dacanay said at a briefing on Tuesday.

This forecast assumes an adverse scenario where the conflict persists up until the end of June or early July this year.

Next year, HSBC expects inflation to average 4.5% under the same scenario.

The Bangko Sentral ng Pilipinas (BSP) expects the consumer price index (CPI) to average 6.3% this year and 4.3% in 2027, it said last week. Both are above its 2%-4% tolerance band.

In March, inflation quickened to a two-year high of 4.1%, bringing the three-month average to 2.8%. The BSP sees the CPI remaining above 5% for the rest of the year.

With the inflation outlook deteriorating due to the war, the central bank’s policy-setting Monetary Board last week raised the target reverse repurchase rate by 25 basis points (bps) to 4.5%.

BSP Governor Eli M. Remolona, Jr. said more hikes are possible as they want to temper spiraling consumer prices.

“I think if things remain at status quo, and again, the conflict persists up until June or July, I think the BSP, given its mandate of price stability, can raise rates to up to 6%,” Mr. Dacanay said.

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