BSP ready to take further action as inflation near 14-year high

November 4, 2022 - 4:27 PM
A vendor adjusts his mask for protection against the coronavirus disease (COVID-19) before starting to work in a market in Quezon City, Metro Manila, Philippines, July 21, 2020. (Reuters/Eloisa Lopez)
  • October CPI up 7.7% y/y vs 7.1% forecast in Reuters poll
  • October core inflation at 5.9% vs September’s 5.0%
  • BSP: Inflation risks tilted to upside in 2022, 2023
  • BSP to hike interest rates by 75 bps at Nov. 17 meeting
  • BSP: Prepared to take further actions to hit inflation target

The Philippine central bank said on Friday it was ready to take all further monetary policy actions needed to bring inflation back within target, after data showed the headline rate accelerating to its fastest pace in nearly 14 years in October.

The consumer price index climbed 7.7% in October from a year earlier, the fastest rise since December 2008, driven by price gains in key commodity groups, particularly food and non-alcoholic beverages. It outpaced the 7.1% median forecast in a Reuters poll.

READ: Philippines October inflation climbs to 7.7% yr/yr

The headline figure also came in near the top end of the central bank’s 7.1% to 7.9% forecast for the month.

Inflation in January-October averaged 5.4%, well outside the central bank’s full-year target range of 2% to 4%.

Indicating broadening price pressures, core inflation – which strips out volatile food and fuel – hit 5.9% in October from an upwardly revised 5.0% in September, the Philippine Statistics Authority said.

The statistics agency sees a “substantial probability” that inflation could increase further in November, partly because of the impact of a recent destructive tropical storm.

“The risks to the inflation outlook appear to be tilted to the upside for 2022 and 2023 but are seen to be broadly balanced for 2024,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

The BSP, which has so far raised rates five times this year by a total of 225 bps PHCBIR=ECI to 4.25%, said it remained “prepared to take all further monetary policy actions necessary to bring inflation back to the target over the medium term”.

On Thursday, BSP Governor Felipe Medalla said the central bank will hike key interest rates by 75 basis points at its Nov. 17 meeting to match the latest U.S. Federal Reserve’s tightening and temper any impact on the country’s exchange rate.

READ: BSP to match Fed’s 75 bps rate hike on November 17

The peso PHP=, Southeast Asia’s worst-performing currency, has lost more than 13% against the U.S. dollar so far this year.

“We expect the central bank to hike again in December, likely matching any move from the Fed to close out the year,” said ING senior economist Nicholas Mapa

—Reporting by Neil Jerome Morales; Writing by Enrico Dela CruzEditing by Ed Davies