Economists believe April inflation rose to 3.9 to 4.3 percent due to higher prices of rice and fuels.

In March, inflation hit 3.7 percent after rising from 2.8 percent in January and 3.4 percent in February.

Michael Ricafort, chief economist of Rizal Commercial Banking Corporation, said inflation last month likely increased again to 4.1 percent as El Niño persists.

“Rice accounts for nearly 9 percent of the inflation basket, and the lack of rainfall could also reduce the supply of other food products that could lead to some pickup in the overall inflation,” he told the Daily Tribune in a Viber message.

Israel-Iran conflict

While global oil prices have declined, Ricafort said April data show they remained among six-month highs amid the ongoing armed conflict between Israel and Iran.

Dan Roces, chief economist of Security Bank Corporation, added price movements of power and water supply also likely pushed up overall inflation to at least 3.9 percent.

“While food inflation remains the primary contributor to the overall inflation rate, price growth in utilities may have outpaced food on a monthly basis,” he said in an email.

However, China Banking (Chinabank) Corporation’s research arm expects a smaller effect from electricity rates, along with certain food items.

“Upward pressures were likely tempered by lower prices of fish, fruits, vegetables, and LPG. Additionally, Meralco-serviced areas saw lower electricity rates for the month,” the bank said in an email communication sent to the Daily Tribune.

Chinabank estimates April inflation had settled at 4 percent.

The Bangko Sentral ng Pilipinas (BSP) projects the latest inflation to range from 3.5 to 4.3 percent.

Steady policy rate

Given the higher inflation forecast, the economists said the BSP Monetary Board might retain its policy rate of 6.5 percent to stabilize prices within 2 to 4 percent this year.

“Looking ahead, unfavorable base effects and persistent price pressures may drive inflation above the BSP’s target from May to July,” Chinabank said.

To minimize increases in food prices, Roces said non-monetary government agencies must raise food production.

“The BSP will closely monitor food price dynamics and emphasize the need for supply-side measures by the national government to address any persistent pressures and complement the monetary side,” he said.

The economists expect food prices to decline starting August which they said will allow the BSP more “flexibility” to lower its interest rate benchmark for banks.

However, they stressed that prices of non-volatile items continued to fall to 3.3 percent, suggesting that the BSP’s policy decisions are taking effect.