Macroeconomic Forecast Philippines

While consumer price inflation (CPI) has been benign through 2010 and early 2011, we are starting to see signs that the situation may be starting to change with headline inflation reaching 4.5% y-o-y in April (from 3.0% in December). Moreover, core inflation (which strips out volatile energy and good prices) has also been ticking up, reaching a seven-month high of 3.8% y-o-y in April. At this point, with the repo rate already lifted to our forecast of 6.50% by end-2011, we see upside risks to our projection for no more rate hikes this year.

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