- Increase due to double-digit gain in rice prices
- Sept CPI opens the door to further interest rate hikes
- Central bank says ready to resume tightening as needed
MANILA — The Philippine central bank said on Thursday it was ready to resume tightening monetary policy after consumer prices rose for a second month in September because of rising food costs.
The central bank’s statement followed the release of data from the Philippine Statistics Authority showing a double-digit gain in the price of rice drove the inflation rate last month to accelerate to 6.1% compared to a year ago, its fastest pace in four months.
Still, in the absence of further supply shocks, the Bangko Sentral ng Pilipinas (BSP) said inflation should ease back to within its 2%-4% target for the year even as it flagged upside risks to the consumer price outlook from higher utility costs, transport and wage increases.
Days before the data’s release, BSP Governor Eli Remolona raised the possibility of an off-cycle rate hike, but economists said the probability of that happening is low, although a hike at the central bank’s Nov. 16 meeting looked certain.
“I think this inflation print is enough to drive one more hike….I doubt an off cycle hike is possible, but 16 November should see one more hike,” Shreya Sodhani, regional economist at Barclays, said in an email.
Last month’s inflation print, which was higher than August’s 5.3% rate and above the 5.3% forecast in a Reuters poll, brought year-to-date average inflation to 6.6%.
The central bank, which kept interest rates steady at 6.25% at its last four meetings, said it “stands ready to resume monetary policy tightening as necessary to prevent the renewed broadening of price pressures.”
Rice inflation quickened by 17.9% in September, the fastest in over 14 years, the statistics authority said, helping fuel the 10% food inflation rate for the month.
However, there are some signs the inflation gains from rising rice prices may be easing.
The country’s economic planning agency on Thursday said it would recommend extending the lowered tariff rates on rice until December 2024, a day after Philippine President Ferdinand Marcos Jr lifted a cap on rice prices.
With the supply of rice adequate, Marcos has pinned the blame on the increase in the cost of the national staple on hoarders, smugglers and price manipulators.
Overall, the Philippines saw some slight moderation in underlying price pressures, with core inflation, which doesn’t include volatile food and energy prices, easing to 5.9% in September from 6.1% in August.
“This data point and the shift in the inflation path likely prompts one or two (rate hikes) this year although we feel the timing might be more tied to a potential, if it happens, Fed hike in early November,” ING Economist Nicholas Mapa said.
– Reporting by Neil Jerome Morales and Mikhail Flores; Writing by Karen Lema; Editing by Martin Petty and Christian Schmollinger
