Foreign banks expect Philippine inflation to have picked up further in May, above the already more-than-four-year high of 7.2 percent last April, making room for more interest rate hikes by the Bangko Sentral ng Pilipinas (BSP).

In a May 29 report obtained by Manila Bulletin, Goldman Sachs Economics Research projected headline inflation last month at 7.6 percent, although lower than the Bloomberg consensus of 8.2 percent.

“On a sequential basis, we expect consumer prices to rise 0.3 percent month-over-month (non-seasonally adjusted) in May, driven mainly by higher food prices,” the research arm of global investment giant Goldman Sachs said.

“While energy prices have fallen on a month-over-month basis, the nominal level remains elevated,” it added.

The government’s report on the May consumer price index (CPI) will be released on Friday, June 5.

British banking giant Barclays, meanwhile, sees a similar headline inflation rate of 7.2 percent last month.

“A pullback in retail fuel prices along with a loss of momentum in the rise in rice prices likely helped to stabilize the headline CPI measure in May,” Barclays said in a separate May 29 report obtained by Manila Bulletin.

“We expect core inflation to only edge up to four percent year-on-year in May from 3.9 percent in April,” Barclays added. Core inflation excludes volatile items such as energy and food prices, making it a better gauge of underlying price pressures.

Skyrocketing inflation is only one of the many challenges facing the Philippine economy, which Barclays noted bucked the trend of improving output gaps in emerging Asia and instead “turned slightly negative.”

“The further deterioration in the Philippines was unsurprising, given ongoing challenges around the corruption allegations in public-sector flood-control projects and the energy-saving measures that the government undertook in the wake of the global oil price surge,” Barclays said.

In a June 3 report, DBS Bank Ltd. said Philippine inflation likely exceeded eight percent last May. The Singapore-based lender earlier projected an 8.3-percent inflation rate for the month.

“Upside pressures were likely driven by food (rice, vegetables, meat, etc.), domestic fuel price increases (compared to last year), and a weak currency,” DBS senior economist Radhika Rao said. The oil-vulnerable peso fell to fresh record-low levels last month amid a prolonged war in the Middle East.

“Sequential pressures, nonetheless, must have eased from a recent rollback in domestic fuel prices, moderation in few food segments, and slightly lower utility rates,” DBS added.

As such, DBS said it expects the BSP “to tighten domestic rates further this year.”

DBS earlier projected the current BSP policy rate of 4.5 percent to increase to 4.75 percent in the second quarter before peaking at 5.25 percent by the third quarter.