Quicker Philippine Inflation Opens Door to Sustained Rate Action
(Bloomberg) — Philippines’ inflation inched up further last month yet bets that price growth has already peaked open the door for smaller interest rate increases.
Consumer prices rose 8.1% from a year ago in December, the Philippine Statistics Authority reported Thursday. While it remains at the fastest pace since November 2008, the print was a tad slower than the 8.2% median estimate in a Bloomberg survey.
The latest data was in line with the view that “elevated inflation could peak in December 2022 before decelerating,” Bangko Sentral ng Pilipinas said in a separate statement. National Statistician Dennis Mapa said the Dec. print “could be a peak” while adding “there’s still a risk” of a spike this month.
“A high base from January and the continued sequential slowdown in price increases suggests that inflation should slow, though gradually,” Shreya Sodhani, an economist at Barclays Bank Plc, said in a note after the data.
BSP could deliver two, 25 basis-point rate increases this year “to temper unrelenting inflation pressures even as it has more comfort on the peso now,” she said. The Philippines has raised its key rate by a total 3.5 percentage points in the past year, including two 75-basis point moves and three half-point actions.
The peso was little changed at midday at 55.94 per dollar. Philippine lenders advanced for a second day on speculation of sustained monetary tightening. Philippine policymakers, among the most aggressive in the region, are next scheduled to set the key rate on Feb. 16.
What Bloomberg Economics Says…
“Faster Philippine inflation in December keeps the pressure on Bangko Sentral ng Pilipinas to keep raising rates. While the headline CPI rose just slightly, the core gauge jumped — climbing further above the desired level and indicating strong domestic demand”
— Tamara Henderson, Asean economist
For the full note, click here
Annual core inflation — which takes out volatile food and energy costs — settled at 6.9% in December, quicker than the previous month’s reading. Price growth averaged 5.8% in 2022, way above the central bank’s 2%-4% target.
Risks to the price outlook this year are seen tilted up but likely balanced for 2024, said BSP as it repeated a pledge to “take all monetary policy action necessary to bring inflation back” to target.
Last month, BSP Governor Felipe Medalla flagged continued rate increases at least in the next two policy meetings. Yet with the Federal Reserve’s downshift in tightening amid concerns over a slowing global output growth, analysts’ focus is turning to when domestic inflation will peak and the timing of BSP’s rate pause.
“Protecting the purchasing power of Filipinos remains on top of the government’s priorities as domestic and global headwinds continue to be a challenge,” the Philippines’ economic planning agency said in a statement.
—With assistance from Andreo Calonzo, Tomoko Sato, Cecilia Yap and Michael J. Munoz.
(Adds economist voices, government statement.)
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