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Philippines inflation unexpectedly quickens to 5.3% in August

Vendors sell vegetables and other produce at a market along the Philippine National Railways (PNR) tracks in Calamba, Laguna, June 2, 2023. — PHILIPPINE STAR/MIGUEL DE GUZMAN

MANILA – Philippine inflation proved stubborn after it unexpectedly quickened for the first time in seven months in August, due largely to an uptick in food and transport costs, keeping the pressure on the central bank to maintain its hawkish stance.

The consumer price index (CPI) rose 5.3% year-on-year in August, above the 4.7% forecast of economists in a Reuters poll, which matched the previous month’s pace, but within the central bank’s 4.8% to 5.6% projection for the month.

Excluding volatile energy costs, core inflation eased to 6.1% in August from the previous month’s 6.7%.

Tuesday’s data affirmed the central bank’s belief the country was not yet out of the inflation woods and raised the possibility it could resume raising its policy rate after keeping it steady at 6.25% at its last three meetings.

Following the data, the Bangko Sentral ng Pilipinas (BSP) said in a statement it “stands ready to adjust the monetary policy stance as necessary” to prevent the broadening of price pressures and emergence of additional second order effects.

August inflation brought year-to-date inflation to 6.6%, well outside the central bank’s 2%-4% comfort range.

ING economist Nicholas Mapa said rice, transport and electricity costs will determine inflation path for next few months. While he expects the BSP to stay on hold, he said in a post on platform X, it “could consider a hike if this becomes a trend.”

The Bangko Sentral ng Pilipinas (BSP) next meets on Sept 21 to review policy.

To keep food prices at bay, the Philippines has imposed price ceilings on rice, which it said would remain in effect as long as the government deemed them necessary. Food accounts for 35% of CPI.

Following the unexpected rise in August consumer prices, the economic planning minister also said the Philippines, one of the world’s biggest rice importers, may reduce tariffs on the grain to help lower domestic costs.

“To partially counterbalance the rise in global prices and alleviate the impact on consumers and households, we may implement a temporary and calibrated reduction in tariffs,” Economic Planning Secretary Arsenio Balisacan said. — Reuters


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