Slowing Inflation Gives Philippines Hope to Dodge Rate-Hike Wave
(Bloomberg) -- Philippine inflation was the slowest in a year last month, giving the central bank an opportunity to support growth with record-low interest rates and withstand pressure from a tightening global monetary policy environment.
Consumer prices rose 3.6% from a year ago last month, the statistics agency reported Wednesday, the weakest since the same month in 2020 and below the 4.1% median estimate in a Bloomberg survey.
The central bank “stands ready” to keep accommodative monetary policy while guarding against risks to prices and financial stability, Governor Benjamin Diokno said after the data’s release. While supply disruptions due to Typhoon Rai last month may temporarily stoke food costs, inflation is seen settling close to the midpoint of the bank’s 2%-4% target this year, he said.
Easing inflation was due to slower increases in food and transport costs in December, according to the statistics authority. Full-year 2021 inflation was at 4.5%.
The agency will release inflation data that’s rebased to 2018 starting next month when it reports January figures. The central bank has kept its policy rate at a record low 2% for more than a year. Its next meeting is scheduled for Feb. 17.
Here’s what analysts say
Nicholas Mapa, ING Groep NV:
- The central bank is sounding dovish still and slowing inflation gives it some room to stay accommodative
- However, 2022 may be a different story, as the Federal Reserve may hike interest rates, which could finally prompt the Philippines to reverse course by the end of the second quarter
Euben Paracuelles, Nomura Holdings Inc.:
- Inflation falling back to within the central bank’s target will allow it to focus on supporting the economic recovery especially in light of the omicron threat and the recent spike in new Covid-19 cases locally
- “We have already changed our call earlier and no longer see policy rate hikes” in 2022
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