March inflation up 3.7%

The country's headline inflation rate surged to 3.7 percent in March due to soaring prices of food and transportation during the month, the Philippine Statistics Authority said on Friday.

In a briefing, National Statistician and PSA chief Claire Dennis Mapa said the 3.7 percent headline inflation rate, or the pace of increase in the prices of goods and services, increased from 3.4 percent in February but is lower than the 7.6 percent rate recorded in March 2023.

Core inflation, which strips out volatile food and energy items in the consumer basket, decelerated to 3.4 percent in March 2024 --- indicating a decline from the preceding month's 3.6 percent and notably lower than the 8.0 percent recorded in March 2023.

Year-to-date, the average inflation rate stands at 3.3 percent.

March's 3.7 percent rate is close to the upper range of the government's targeted range of 2 percent to 4 percent for inflation. This indicates a consecutive increase in inflation for the second month in a row, following a downward trend over the past four months.

“Our expectation is (the inflation) will increase... until July because of (low) base effect, unless there is an intervention that will happen in the market that will bring down prices," Mapa said.

“We expect that in August it will gradually slow down,” Mapa added.

Higher prices in food, transportation, and accommodation

In the briefing, Mapa said the increase in inflation last month was primarily fueled by higher prices in food and non-alcoholic beverages --- rising from 4.6 percent in February to 5.6 percent in March.

The national statistician added that the prices in transportation services, likewise, increased month-on-month from 1.2 percent in February to 2.1 percent in March, followed by restaurants and accommodation services –climbing from 5.3 percent to 5.6 percent.

Rice inflation in March surged to 24.4 percent, marking its most substantial rise since reaching 24.6 percent in February 2009. This segment contributed to almost half of the overall inflation rate for March.

Mapa explained that the persistent substantial double-digit rise in rice inflation was attributed to a low base effect observed from January to July 2023, during which inflation for this agricultural commodity remained relatively low.

BSP may maintain hawkish stance

Meanwhile, Security Bank chief economist said Robert Dan Roces said the accelerated headline inflation in March will likely prompt the Bangko Sentral ng Pilipinas (BSP) to maintain a hawkish stance, possibly prolonging the period of higher interest rates to prevent destabilizing inflation expectations.

During its previous monetary policy meeting in February, the Monetary Board opted to maintain interest rates at 6.5 percent, a level they had held steady since an unscheduled increase in October 2023. The Monetary Board is scheduled to reconvene on Monday, 8 April, to consider any adjustments to its primary policy rate.

"While the headline inflation figure is lower than expected, rising food prices remain a concern," Roces said.

BDO Trust and Investments Group chief investment officer Frederico Ocampo, for his part, said the BSP will refrain from lowering interest rates until the latter part of 2024.

"As inflation goes down again below 4 percent, and becomes a trend --- not only one point, but a trend --- that’s when they will cut interest rates,” Ocampo said.