ING’s Deepali Bhargava highlights that Philippine Consumer Price Index (CPI) has jumped to a three‑year high, driven mainly by broad‑based food and fuel‑related pressures, and now looks set to average above 8% in 2Q. With Brent expected around US$104/bbl and inflation broadening into core, ING now sees a June Bangko Sentral ng Pilipinas (BSP) rate hike as assured, with risks skewed to larger and faster tightening.

CPI overshoot points to faster tightening

"Headline CPI inflation in the Philippines rose sharply to 7.2% year-on-year in April, much higher than our expectation of 5.2%, and up by over 3 percentage points from 4.1% YoY in March."

"With negotiations around the US-Iran conflict dragging on and no imminent de-escalation in sight, our base case has shifted toward higher global oil prices, with supply disruptions easing materially only in 3Q."

"Against this backdrop, we now expect Brent crude prices to average around US$104/bbl in 2Q, with CPI inflation likely to rise further and average above 8% in 2Q, pushing our full-year inflation forecast to 6% YoY."

"The sharp CPI upside surprise reinforces the risk of larger and faster rate moves by the BSP."

"In this context, a 25bp rate hike in June looks assured, with risks clearly tilted toward a 50bp move."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)