Headline inflation in the Philippines will likely average at 3.8% this year, with risks of surpassing the central bank’s target of between 2% and 4%, says ANZ Research.

“The Philippines is the only economy where inflation risks overshooting the upper end of the official target range of 2-4%,” ANZ said during its quarterly research report published on Tuesday.

This latest forecast is higher than the 3.5% previously issued by ANZ and also exceeds the full-year forecast of 3.6% by the Bangko Sentral ng Pilipinas (BSP). 

“We estimate the monthly momentum will need to halve if annual inflation is to remain in the official target range. In part, this inflation problem is due to negligible policy intervention in the food and energy markets,” ANZ stated.

“The monthly change in headline inflation averaged 0.6% in January and February. If this momentum is sustained, annual inflation will rise above 4% from the next quarter,” it went on to add.

Last month inflation accelerated to 3.4%, the first time it has done so in five months, Business World reports.

Central bank governor Eli M. Remolona, Jr. and Finance Secretary Ralph G. Recto both forecast inflation will increase to 3.9% in March, which would signal the second consecutive month of an inflation pickup.

Furthermore, during a report earlier this month, ANZ forecasts Philippine inflation will rise further over the next few months as underlying inflationary pressures remain high.

“Base effects will push up inflation in the coming months. While rice and fuel prices have started to stabilise, the percentage point contributions from the food and transport components are set to rise in Q2 2024 even if price indices remain flat at the current levels,” as per the report.

“If above-trend sequential gains persist, core inflation will breach 4% again towards the end of the year. The latest available data on other indicators, such as non-agriculture wage growth, consumer credit growth and year-ahead inflation expectations, have remained on an uptrend. Minimum wage hikes are another watchpoint,” it continued.