Quicker Philippine Inflation Could Keep Central Bank on Hold

(Bloomberg) — Inflation in the Philippines accelerated to its fastest pace in 20 months in November on higher food and beverage costs, giving the central bank reason to pause on further rate cuts.

Consumer prices last month climbed 3.3% from a year earlier, compared with 2.5% in October, the Philippine Statistics Authority said Friday. The November figure exceeded the 2.6% median estimate in a Bloomberg survey and the central bank’s 2.4%-3.2% forecast range.

Hours after the inflation release, Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the impact of typhoon-driven supply disruptions is likely to be largely transitory and inflation will settle within the target range of 2%-4%. He also flagged risks to the global and domestic economy despite promising news recently on Covid-19 vaccines.

chart, line chart: Higher food prices caused inflation to accelerate

© Bloomberg
Higher food prices caused inflation to accelerate

The benign inflation picture until now allowed the central bank to cut its key interest rate to a record-low 2% last month, seeking to juice the economy’s sluggish recovery from the pandemic. The central bank’s next rate-setting meeting is scheduled for Dec. 17.


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Policy makers at that meeting “will likely hold and assess the general direction of inflation,” said Dan Roces, chief economist at Security Bank Corp. in Manila.

Diokno’s latest comments support his assertion that inflation remains manageable. On Thursday, he said risks to the inflation outlook remained on the downside given a strong peso and tepid consumer spending, while cautioning that the bank’s monetary policy actions may take longer to impact the economy.

The peso was at 48.030 to a dollar as of 11:13 a.m. local time, near its highest level since October 2016. The currency is up 5.4% so far this year.

Other Highlights:

Inflation from January through November was at 2.6%, within the revised projection of 2.4%-2.6% for the whole yearFood inflation rose to 4.5% in November from 2.1% the previous month, the statistics authority said, citing the impact of recent typhoonsInflation in the capital region accelerated to 3.5% last month, from 2.5% in OctoberNovember’s inflation was the fastest since March 2019, when it was also 3.3%

(Updates with central bank governor’s comments in third paragraph.)

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