Several Asia-Pacific sovereigns were seen to rapidly increase interest rates as inflation concerns reverberate across the region, with the Ukraine war, surging fuel prices, and supply chain disruption shrinking comfort zones.
According to Moody’s Analytics Pacific Economic Preview for the first week of August, inflation pressures would prompt central banks to take further actions.
“The focus next week will be on central bank meetings in India and Australia,” Moody’s Analytics said.
“The Reserve Bank of Australia (RBA) is expected to hike by 50 basis points, taking the cash rate to 1.85 percent. That would see cumulative hikes from May reach 175 basis points. We expect more hikes in the second half will take the cash rate to 2.6 percent by 2022. The RBA is moving aggressively to tame inflation that has broadened well beyond the supply side.”
It went on to say: “Demand-pull inflation is running high. The labor market is extremely tight, with the unemployment rate at a five-decade low of 3.9 percent. Job vacancies are also elevated and will put downward pressure on unemployment in coming months.”
5.9% CPI rise seen
Moody’s Analytics expects the Philippines consumer price index to settle at 5.9 percent in July.
The figure is higher than the Bangko Sentral ng Pilipinas (BSP) of a low 5.6 percent and high 6.4 percent July inflation.
“Inflation for the month was driven by the continued increase in food prices, further transport fare hikes and peso depreciation,” BSP Governor Felipe Medalla said.
Meanwhile, lower oil prices, reduction in electricity rates in Meralco-serviced areas, and lower pork prices are likely to temper in part said price pressures.
“Looking ahead, the BSP will continue to monitor closely emerging price developments to enable timely intervention to arrest emergence of further second-round effects, consistent with BSP’sBSP’s mandate of price and financial stability,” Medalla added.
Earlier, Medalla signaled that the BSP would continue its monetary policy tightening cycle to keep inflation in check after the US central bank delivered a considerable interest rate hike of 75 basis points.
In addition, Moody’s expects the Reserve Bank of India to adopt a 50 basis points rise this month, taking its policy rate to 5.4 percent.
The central bank is moving to calm inflation, which remained at seven percent year-on-year in June.
“Our baseline is that inflation peaked in mid-2022. Underlying this assumption is that oil prices have passed their peak but, like other commodity prices, will remain high for the remainder of 2022. Prices of other critical food products such as wheat and corn have eased from their peak amidst easing global-supply concerns,” the report said.