NextGen Day

Due in part to increased oil costs on the global market, inflation is predicted to reach higher levels of at least 5.5 percent in the second and third quarters of 2022.

According to the Market Call’s June 2022 issue, which was published on Monday, inflation surpassed the government’s target range of 2-4 percent last May due to faster increases in items under the heavily weighted categories of food, non-alcoholic beverages, and transport due to supply constraints as well as rising oil prices on the global market.

Last April, when it increased from 4% to 4.9% and then to 5.4% the following month, the rate of price increases exceeded the government’s goal range.

Inflation in the year’s first five months was on average 4.1 percent.

According to the monthly journal jointly produced by the First Metro Investment Corporation (FMIC) and the University of Asia and the Pacific (UA&P), annualized inflation dropped from 12.7 percent to 6.2 percent in May of last year from a month-over-month increase of 1 percent.

It stated, citing projections for further increases in the price of oil on the global market, “We estimate headline inflation will remain over 5.5 percent for the rest of the year, despite the overall slower rate in both actual and seasonally adjusted terms.”

It predicts that average inflation would be around 5.4 percent in the second quarter, 5.7 percent in the third quarter, and then decline in the final three months of the year.

The article continued, “With foreign goods becoming more expensive, the peso depreciation will drive domestic food producers to step up their output.”

The FMIC and UA&P predict that the peso will continue to decline against the US dollar due to the US currency’s general strength, rising US interest rates, and growing trade deficits, which are expected to reach USD 50 billion this year.

After beginning the year at 51 levels, the local currency again finished at 55 levels versus the US dollar on Monday.

According to the research, the local currency is likely to suffer from rising interest rates in the US, where the Federal funds rate has increased by a total of 150 basis points since last March, as well as the widening trade imbalance in the Philippines.

Investors’ concerns over the impending global economic slowdown increased demand for safe-haven assets, it was claimed.

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