DBS projects higher consumer prices

The Development Bank of Singapore has projected a higher consumer price forecast on more expensive food and oil. In its quarterly report dated March 13, the bank revised the forecast to 5% from 3%, which is the higher end of the central bank’s range. It noted that inflation will remain a concern as consumer spending will slightly slow down to 5.7% from 6% in 2007, the highest in 19 years despite a slowdown in remittances due to the peso’s appreciation against the dollar. Last year’s remittances totaled $14.4 billion, 14% higher than in 2006, but DBS noted that a near 16% rise in the peso eroded the rise in value to only 2.4% in peso terms. The study noted that consumer spending will be driven by higher wage growth and the drop in interest rates that "have fueled a mini-consumer credit boom." But "higher fuel and food prices will likely keep driving inflation higher in the months ahead, reducing real wage gains and purchasing power," DBS said. The study sees crude prices averaging ar $85 per barrel this year, and that the economy will continue to feel the impact of a US slowdown since the US accounts for 53% of remitted earnings and 17% of its export market. The bank also noted that the continued appreciation of the peso against the dollar will continue to erode the value of remittances; it sees the peso rising at 5.5% this year. DBS the rice in consumer prices might deter the central bank from further cutting interest rates, and that it may even consider raising rates by the end of the seocnd quarter The Bangko Sentral ng Pilipinas on Thursday kept key rates unchanged due to rising prices. - CSSV/BusinessWorld