Surging Inflation in Philippines Seals Case for Rate Hike
(Bloomberg) -- Consumer prices in the Philippines increased at the fastest pace in more than five years in July, boosting the case for the third interest-rate hike this week.
Inflation quickened to 5.7 percent from 5.2 percent in June, the Philippine Statistics Authority said in a statement posted on its website Tuesday. That exceeded the 5.5 percent median estimate in a Bloomberg survey of economists and was the fastest pace since at least January 2013, based on data provided by the statistics agency.
Responding to the inflation report, central bank Governor Nestor Espenilla said policy makers, who are meeting on Thursday to decide on rates, “will consider all the latest data updates in determining the strength of our follow-through response.”
Espenilla is under pressure to deliver on a pledge for “strong” action on Thursday to rein in inflation. The majority of economists in a Bloomberg survey predict the central bank will raise the benchmark rate by 50 basis points to 4 percent, stepping up its action from the 25 basis-point moves at each of the two previous policy meetings.
Click to read Espenilla pledging “strong” action to damp inflation
“This requires a strong monetary adjustment consistent with what the governor has been saying,” said Angelo Taningco, an economist at Security Bank Corp. in Manila, who predicts a 50 basis-point hike in the benchmark rate this week.
The benchmark Philippine Stock Exchange Index fell 1.2 percent, completing its first back-to-back loss in a month, while the peso depreciated 0.3 percent against the dollar. Both assets were the worst performers among Asia’s major currency and stock markets Tuesday.
Read: Philippine Equities to Suffer as Inflation Soars Further
Food and non-alcoholic beverage costs rose 7.1 percent from a year earlier, while transport costs increased 7.9 percent.
The price of rice, the country’s staple grain, climbed to a record in July. Minimum fares on jeepneys -- the colorful vehicles that are the main form of public transport in the country -- were also raised in Manila and nearby provinces last month.
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