InterAksyon.com means BUSINESS
MANILA - Floods in Metro Manila and nearby provinces may push prices up in the short term, but the Bangko Sentral ng Pilipinas will keep rates steady for the rest of the year, HSBC said.
In its latest research note, the London-based bank said the actual damage caused by the monsoon rains that immobilized most of Luzon should be substantial after affecting 1.2 million people.
Data from the National Statistics Coordination Board showed that Metro Manila alone comprised 1.3 percentage points of last year's 3.9 percent gross domestic product growth.
"Pushing crop damage aside, supply disruptions would likely cause an uptick in food prices. This coupled with rise of crude oil recently will further fuel inflationary pressures," HSBC said.
The bank said core inflation however already had been climbing even before the recent calamity because of robust GDP growth fueled by government and private spending, as well as exports.
Still, headline inflation stayed low because of the sharp declines in transportation costs and abundant food, HSBC said.
The government announced on Wednesday that inflation accelerated to 3.2 percent in July from 2.8 percent in June.
"This means that should food or transportation costs increase, headline inflation would deviate from its current benign rates," HSBC said.
With the recent calamity, food and transportation costs would rise in the following months due to short-term supply shocks and recent rise of oil prices, the bank said.
Because of this, the BSP is unlikely to cut policy rates "anytime soon,” HSBC said.
"While the effects of the floods are ephemeral, pent-up demand remains a concern. As such, we reiterate our call of a hold at the next meeting," the bank said, referring to the policy-making Monetary Board.
Metrobank separately said inflation this year would settle at 3.3 percent, well within the BSP target of 3-5 percent.
The bank expects the heavy rains to place upward pressure on food as these disrupt farm-to-market delivery and limit production of standing crops.
Add to these is the higher electricity rates announced earlier by Manila Electric Co., which supplies Metro Manila and parts of Laguna, Batangas, Cavite and Rizal.
InterAksyon.com means BUSINESS
BUSINESS NEWS
