Economists expect March inflation to increase near or slightly above four percent due to higher food prices.

Dan Roces, chief economist of Security Bank Corporation, projected the latest inflation to range from 3.8 to 4.2 percent.

The Bangko Sentral ng Pilipinas (BSP) aims to stabilize inflation within 2 to 4 percent.

Key driver

“Food inflation is expected to be a key driver of March inflation, potentially due to base effects, some supply shortages from rice, seasonal uptick of fish and certain food items,” he said.

Inflation rose again last month to 3.4 percent from 2.8 percent in January, after the 6.1 percent recorded last September, data from the Philippine Statistics Authority show.

Specifically, food inflation increased to 4.8 percent from 3.3 percent during the period.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation, said El Niño could reduce agricultural production until mid-year, further raising rice prices.

“We’ve seen higher local palay and rice prices in recent weeks, while global crude oil prices stood among 4.5-month highs recently. All of which could lead to some pickup in overall inflation,” he said.

Aside from higher energy and transport costs, Roces added prices of other goods will likely increase due to troubled trade routes.

Baltimore bridge collapse

“The Baltimore bridge collapse, on top of the Red Sea issue, if not resolved quickly, could further disrupt global supply chains and impact import costs in the Philippines,” he said.

A cargo ship hit the Francis Scott Key Bridge over the Patapsco River in Baltimore, Maryland in the US last Tuesday.

Maryland’s Transportation Chief Paul Wiedefled said it may take time to clear the waterway as they suggested breaking the bridge apart into pieces and rebuilding a more “innovative” bridge.

Meanwhile, Houthis rebels continue to attack merchant ships in the Red Sea in protest against Israeli bombings toward Hamas, a Palestinian terrorist group, in the Gaza Strip.

BBC said merchant ships resorted to taking longer routes around southern Africa to avoid the Houthis.

Roces said the Philippine government will likely implement anti-food inflation measures, such as efficient farm irrigation and strategic rice importation, to prevent overall inflation spikes.

High interest rates

S&P Global Ratings economist Vince Conti said the BSP will probably keep interest rates elevated until mid-year to help manage inflation.

He expects a total rate cut of 75 basis points within the second half of the year, lower than the government’s initial projection of 100 basis points.

“The most important reason is inflation only very recently has come down to the BSP’s target range. That’s unlike other Asian economies where they have seen their inflation fall into the target quite earlier,” Conti said.

Roces, however, said inflation rates in general will fall within the BSP’s target due to government interventions and the statistical principle of negative base effects.