Philippine Inflation Quickens Further as Food Costs Soar

Inflation in the Philippines continues to gather pace even as the economy struggles to pull itself out of recession, with the central bank wary of spillover effects from higher prices.

Consumer prices rose 4.7% in February from a year earlier, the statistics agency reported Friday. That’s the fastest pace since December 2018, according to data compiled by Bloomberg, matching the median forecast in a survey of 21 analysts.

Higher prices of food and beverages, particularly meat, drove the increase, national statistician Claire Dennis Mapa said in a live-streamed briefing.

Philippine Inflation Quickens Further as Food Costs Soar

Faster consumer-price gains are entrenching the nation’s real interest rate in negative territory. Central bank Governor Benjamin Diokno said the bank will “carefully assess” how faster inflation impacts the price outlook, and will watch for any evidence of second-round effects when the monetary policy committee meets March 25.

So far the upward trend appears temporary, Diokno said in a mobile-phone text message Friday, reiterating that supply-side shocks don’t require monetary action yet. In public comments, he has repeatedly flagged that the benchmark interest rate will remain on hold in coming months.

“The overall balance of risks to future inflation continues to lean toward the downside, owing mainly to the continued uncertainty caused by the pandemic on domestic and global economic activity,” Diokno said.

Details of Friday’s data include:

  • Core inflation was 3.5% year-on-year in February, versus 3.4% a month earlier
  • Prices of food and non-alcoholic beverages rose 6.7% from a year earlier
  • Transport costs increased 10.4%
Philippine Inflation Quickens Further as Food Costs Soar

The Philippine Stock Exchange Index fell as much as 0.8%, heading for its first back-to-back loss in two weeks. The peso was little changed.

What Bloomberg Economics Says...

“Inflation will likely remain above BSP’s target until pork supply shortages are sorted, with rallying oil prices and a lower statistical base due to add upward pressure in the coming months. Higher prices for staple food items pose an additional challenge to the recovery in the Philippines -- especially as consumption is the pre-dominant growth driver.”

-- Justin Jimenez, Asia economist

Bangko Sentral ng Pilipinas kept its key rate steady at 2% last month to support an economy that has been among the hardest hit in the region by the pandemic, and the slowest to begin recovering. Policy makers see inflation remaining elevated in the first half of the year, and say it should come in at the top end of the bank’s 2%-4% target range for 2021.

“We would not expect any monetary policy action to the increase in inflation pressures,” said Mitul Kotecha, senior emerging markets strategist at TD Securities in Singapore. “If anything, it limits the scope for any easing.”

©2021 Bloomberg L.P.

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