Philippine Inflation Rises To 8.7%, Highest Since December 2008

The Philippines’ consumer price inflation accelerated unexpectedly at the start of the year to the highest level in just over fourteen years, largely driven by higher costs for utilities and food products, data from the Philippine Statistical Authority showed on Tuesday, raising the likelihood of yet another rate hike from the central bank next week.

The consumer price index, or CPI, climbed 8.7 percent year-over-year in January, faster than the 8.1 percent rise in December. Meanwhile, economists had forecast inflation to ease to 7.7 percent.

Moreover, this was the strongest inflation rate since December 2008, when prices had grown the same 8.7 percent.

The core inflation rate, which excludes prices of selected food and energy items, rose to 7.4 percent in January from 6.9 percent in December.

A combination of supply and demand side pressures is likely to keep inflation elevated in the coming months with inflation only grinding lower throughout 2023, ING economist Nicholas Mapa said.

Price pressures are broad-based and Bangko Sentral ng Pilipinas will likely need to sustain rate hikes until inflation heads back towards the target in a convincing manner, the economist added.

“We believe Governor Medalla will whip out a 50bp rate increase in an attempt to get ahead of surging inflation,” Mapa said.

“Medalla previously sounded off on the possibility of pausing “as early as the first quarter” but today’s inflation report likely means BSP will need to stay hawkish in the near term.”

Read more: Philippine Central Bank Lifts Rate By 50 Bps

In December, the bank had raised the benchmark overnight reverse repurchase facility rate by 50 basis points to a 14-year high of 5.50 percent.

The BSP has raised the benchmark rate by a cumulative 350 basis points in the current tightening cycle that began in May last year.

The annual price growth in housing, water, electricity, gas and other fuels accelerated from 7.0 percent in December to 8.5 percent in January.

Prices for food and non-alcoholic beverages registered a double-digit growth of 10.7 percent, which was 10.2 percent in the prior month.

Prices for clothing and footwear increased 4.4 percent, and those for restaurants and hotels grew 7.7 percent.

Transport costs climbed at a slightly slower pace of 11.2 percent, following an 11.7 percent surge in December.

On a seasonally adjusted basis, consumer prices rose 1.0 percent monthly in January, after a 0.3 percent gain in the prior month.

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