Philippines' inflation climbs to 3% in April

According to HSBC, inflation is set to o rise from now on and may likely reach the Central Bank's 5 percent projection by the year's end.

Here's more from HSBC:

Facts: Headline inflation rose to 3.0% y-o-y in April from 2.6% in March. On a sequential basis, price pressures rose 0.6% m-o-m sa from 0.1% in March.

Core inflation increased to 3.4% y-o-y from 3.0% in March. Month-on-month prices rose 0.6% sa from 0.4% in March.

Food prices rose 1.8% y-o-y from 1.5% in March. On a sequential basis, food prices rose 0.7% m-o-m sa from 0.2% in March.

Implications: The acceleration of prices is just beginning. Inflation, while still at the bottom of the BSP's 3-5% target, is set to rise from now on. The pressures are coming from the filtering through of easing measures in 1Q, secondary effects from higher oil prices as well as stronger growth. While prices are rising (note the strong uptick of core inflation in April), they are still at the bottom of the BSP's target.

Inflation will likely reach the top end of the target range by year-end, although it is unlikely to breach it. What this means is that the next move for the BSP is up rather than down. For now, however, inflation is still low enough for monetary officials to keep rates accommodative. Although we have called for the next hike to not come until 1Q2013, it could come as early as the last quarter of 2012.

Bottom line: Prices picked up in April after five months of. The trend is expected to continue for the rest of the year, although it won't be enough to breach the upper bound of the BSP's inflation target. As such, the BSP has room to keep rates accommodative for the time being.