The Philippine unit of Dutch financial giant ING Bank led by bankero Hans Sicat sees inflation expectations spiraling in a frenzy as the pump prices of petroleum products in the country soar to record levels amid the Russia-Ukraine war.
ING Bank Manial senior economist Nicholas Mapa said inflation expectations will begin to spiral into a frenzy unless arrested by monetary authorities as consumers and firms see gasoline and diesel prices at record levels.
“With domestic prices hitting the highest level based on the series provided by the Department of Energy, we can expect second round effects to begin to surface,” Mapa said.
The Dutch financial giant sees inflation breaching the upper end of the BSP’s two to four percent target as early as the second quarter, with higher inflation sapping some momentum from the economic recovery.
“Nonetheless, authorities remain hopeful of a seven to nine percent (output) expansion, suggesting that growth can still easily post four quarters of growth in 2022 for as long as the economy remains open,” Mapa added.
BSP Governor Benjamin Diokno reiterated the central bank continues to have room to keep rates untouched despite the spike in global crude oil prices.
“With oil moving well-past this level, Diokno clarified that we would need to see oil above $95 percent barrel for a substantial amount of time while Dubai crude has been above $95 for five days and counting,” Mapa said.
Previously, the BSP chief drew a line in the sand at $95 a barrel indicating that inflation would not breach two to four percent target should oil stay below this level.