PHILIPPINE INFLATION likely further quickened in February, with upward pressure expected from higher prices of cooking gas and food, analysts said.

A BusinessWorld poll of 17 analysts yielded a median estimate of 8.9% in February, within the 8.5% to 9.3% forecast range given by the Bangko Sentral ng Pilipinas (BSP) last week.

If realized, it would be faster than the 14-year high of 8.7% in January and the 3% a year earlier.

February would also mark the 11th consecutive month inflation exceeded the BSP’s 2-4% target.

The Philippine Statistics Authority will release February consumer price index (CPI) data on March 7.

Inflationary pressures likely remained strong in February, which would be “enough to prevent inflation from peaking,” Hongkong and Shanghai Banking Corp. economist for the Association of Southeast Asian Nations (ASEAN) Aris Dacanay said.

“Although fuel prices have eased, this was likely offset by elevated food prices as trade restrictions on food continued to put pressure on supply,” he said, citing elevated prices of onions, eggs and galunggong (round scad).

Refined sugar prices reached as high as P110 per kilogram in February, nearly double the P65 per kilogram seen a year ago. Egg prices have also gone up to P8-9 per piece from just P6 in February 2022.

Meanwhile, prices of red onions have fallen to P100-P180 a kilo as of end-February, from P200-P330 a kilo as of end-January.

Inflation last month could also have been driven by higher prices of liquefied petroleum gas (LPG) and “strong economic activity,” ANZ Research economist Debalika Sarkar said in an e-mail.

Cooking gas prices increased by P10.00-11.20 per kilogram in February.

“The reduction in retail pump prices and lower electricity tariffs set by the Manila Electric Company (Meralco), however, were sources of partial relief,” Ms. Sarkar said.

Meralco cut the overall rate for a typical household by P0.0106 to P10.8895 per kilowatt-hour (kWh) in February.

Philippine National Bank economist Alvin Joseph A. Arogo said in an e-mail that inflation may have accelerated in February as the “lagged and second-round effects of the commodities and foreign exchange spike from last year have generally not started to wear off.”

Meanwhile, China Banking Corp. Chief Economist Domini S. Velasquez said inflation in February may have been unchanged from January’s 8.7% due to the decline in vegetable prices, the rollback in pump prices and lower power rates.

Pump price adjustments stood at a net decrease of P0.50 a liter for gasoline, P5.45 a liter for diesel and P6.85 a liter for kerosene in February alone.

“On the other hand, core inflation likely rose to 8% given more commodities being affected by persistently high inflation. Service activities such as restaurants and accommodation and recreation will likely exhibit higher prices,” Ms. Velasquez said.

Core inflation, which excludes volatile prices of food and fuel, jumped to its fastest pace in more than two decades at 7.4% in January from 6.9% in December.

Ms. Velasquez said elevated inflation may push Filipinos to seek wage increases and more subsidies, while transport groups may push for fare hikes, which may cause a “wage-price spiral” and lead to “runaway inflation.”

“Pro-active and preemptive non-monetary measures are needed to prevent another round of inflationary pressure. Sufficient food supply, improvements in domestic logistic chain and storage could help bring down food prices,” she said.

PEAK?

Security Bank Corp. Chief Economist Robert Dan J. Roces said more food imports and targeted assistance to transport drivers, farmers, and fisherfolk are expected to cushion the impact of inflation.

“As such, there is a good probability that the February print could be ‘toppish’ but of course significant upside risks remain for the year,” Mr. Roces said, adding that price pressures should taper off by the second quarter.

Gareth Leather, Senior Asia economist for Capital Economics, said headline inflation likely peaked in February, and will drop steadily for the rest of the year.

“But inflation is unlikely to return to (2-4%) target before the end of the year, much later than in other parts of the region,” he said.

For Makoto Tsuchiya, assistant economist at Oxford Economics, inflation is close to peaking.

“With weaker sequential growth amid subsiding supply-side pressures and stronger currency, CPI inflation will likely peak this quarter, before moderating and reaching the BSP’s target band in the fourth quarter,” he said.

Mr. Tsuchiya said these near-term inflationary pressures will push the BSP to continue tightening, although at a moderate pace.

Most analysts expect the Philippine central bank to deliver a 25-bp rate increase on March 23 in a bid to keep inflation expectations in check.

“We think the BSP will hike by 25 bps at each of its March and May meetings, before pausing throughout the year,” Mr. Tsuchiya said.

While his baseline view is a 25-bp increase on March 23, PNB’s Mr. Arogo said “a significantly higher-than-expected February print may force the central bank to be more aggressive with a 50-bp hike.”

Meanwhile, Bank of the Philippine Islands (BPI) Lead Economist Emilio S. Neri, Jr. said the central bank may raise rates by as much as 50 bps again at the March meeting to “rein in inflation expectations” if inflation stood at 8.9% in February.

BSP Governor Felipe M. Medalla on Friday said the Monetary Board may likely do another aggressive rate hike at its policy meeting this month if inflation breaches the 9% level in February.

“Well, the worst-case scenario is above 9%,” Mr. Medalla said, “If that’s the case, clearly, we have to do something.”

The Monetary Board has hiked borrowing costs by 50 bps on Feb. 16, bringing the key policy rate to its near 16-year high of 6%.

This has brought the total rate hikes of the BSP since May last year to 400 bps.

“If BSP opts for a 50-bp hike, the Monetary Board will disengage from the Fed and raise the risk of a terminal rate exceeding 6% especially if faster disinflation in succeeding months is nowhere to be seen,” Union Bank of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion said.

The US Federal Reserve raised the fed funds rate by 25 bps to 4.5-4.75%. It has hiked rates by a total of 450 bps since March 2022. The Fed’s next policy review will be on March 21 and 22.

“Looking further ahead, I hope — though we’ve all been burned by this — that March will start to see a sustained slowdown in headline inflation,” Miguel Chanco, chief economist for emerging Asia at Pantheon Macroeconomics, said in an e-mail.

The BSP had revised its 2023 inflation outlook to 6.1% from 4.5% previously. It also hiked its inflation projection to 3.1% for 2024, from 2.8% previously.