Inflation risks broaden as peso weakness compounds supply shocks
Economists expect October inflation to accelerate to 7.6% from 7.2% in September, potentially the highest since March 2023 and the eighth consecutive month above the BSP's 4% ceiling. Higher electricity rates, transport fares, food prices and peso depreciation underpin the forecast, with the official release due November 5.
Higher transport fares, electricity charges and peso-linked import costs are raising recurring household expenses, even as some food prices ease MoM. This strengthens the case for persistent underlying inflation.
Continued oil volatility and El Niño could intensify second-round pressures, while easing commodity prices and a firmer peso would temper inflation. The December 17 BSP meeting is the next policy catalyst.
With the BSP already raising rates by 125bp to 5.5%, we think another hike is increasingly plausible if the October print confirms broader price pressures. We remain cautious on rate-sensitive equities and importers, favoring balance sheet resilience, pricing power and cash flow visibility until inflation expectations and FX pressures stabilize.
Disclaimer: The information, analyses, and views contained herein is based on sources which we, AB Capital Securities, believe are reliable, but is not guaranteed by us and is not to be considered all inclusive. It is not to be construed as an offer or solicitation of an offer to sell or buy the securities herein mentioned. AB Capital Securities and its Directors and Officers and/or members of their families may have a position in the securities herein mentioned and may make purchases and/or sales of the securities from time to time in the open-market and otherwise.
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