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Philippines Inflation at 3-Year Peak

Philippines Inflation at 3-Year PeakPhilippines Inflation at 3-Year Peak

Headline inflation further accelerated to 3.5% in October, the fastest in almost three years, boosted by an increase in prices of non-food items, the Philippine Statistics Authority data released Tuesday showed.

This brought average inflation in the January to October period to 3.2%, compared to the Bangko Sentral ng Pilipinas’ 2 to 4% target, abs/cbn reported.

“We are hoping it’s contained within that range. We know, as the economy is growing, inflation also tends to inch up,” RS Lim and Co President Ali Yu told ANC’s Market Edge. Yu said the central bank was unlikely to raise interest rates when it meets on Thursday.

Economists polled by Reuters said higher fuel prices likely pushed inflation to 3.5%.

Cid Terosa, dean of the University of Asia and the Pacific School of Economics, said the acceleration was widely expected given the increase in utility prices and the peso-dollar exchange rate. “Because of rising prices of petroleum products and weak peso,” he said.

Pump prices of petroleum products increased in three out of the four weeks of October, while the peso fell to fresh 11-year lows against the dollar during the month.

Policymakers have kept policy settings steady since the September 2014 rate hike of 25 basis points, as inflation has remained within the central bank’s comfort zone despite a continuing robust growth of the domestic economy.

The central bank set the main rate at 3% when it moved to an interest rate corridor in June last year to make policy transmission faster.

Most analysts in the same poll believed the Bangko Sentral would keep key rates steady on Thursday and for the rest of the year. Two predicted a 25-basis-points rate hike as early as this week to keep demand driven price pressures in check.

Third-quarter GDP data, due to be released on Nov. 16, would likely show the economy grew faster than the previous quarter’s 6.5%, according to economic planning chief Ernesto Pernia, driven by strong domestic demand and farm sector.

 

 

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