ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Philippine inflation at nine-year high, pressures central bank

Prices increased at 6.4% rate in August and wiped out benefits of a weak peso

A worker sorts grocery items at a supermarket in Las Pinas, Metro Manila, Philippines.   © Reuters

MANILA -- Inflation in the Philippines reached a fresh nine-year high in August, hitting a level that could pressure the country's central bank to further tighten monetary policy and hurt growth prospects for the rest of the year.

Inflation last month reached 6.4%, breaching the 6% level for the first time since March 2009. The uptick exceeded market expectations and the estimate of Bangko Sentral ng Pilipinas. Investors and the central bank had forecast 5.9% price growth.

The Philippine Statistics Authority said inflation was driven by surging prices for food and nonalcoholic beverages. The inflation rate for this subcategory was 8.5%.

Housing and utility costs rose 5.5% on the year.

BSP Gov. Nestor Espenilla on Wednesday did not rule out the possibility of another round of tightening at its next policy meeting, on Sept. 27. He said the BSP will also consider external developments and whether the U.S. Federal Reserve exerts "undue pressure" on the peso.

"Under the circumstances," Espenilla said, "we will weigh the need for further monetary policy action. Appropriate recommendations will be presented ... at its next policy meeting.

"It is most critical at this point to restore inflation back to the target range [as soon as possible] and securely anchor inflationary expectations."

Espenilla said much of the inflationary pressure stems from food supply shocks, particularly in the rice market, and from elevated oil prices. These developments, he said, are best addressed by nonmonetary measures.

Inflation has averaged 4.8% in the first eight months, above the central bank's target of 2-4%. The BSP said price increases will peak in the third quarter and are expected to then ease, falling within the central bank's target by 2019.

The BSP has raised its policy rate by 100 basis points since May, after holding steady for nearly four years. Last month, the bank lifted its benchmark rate by 50 basis points, to 4%, its most aggressive monetary action in over a decade.

Inflation has darkened the Philippine economy, which grew 6% in the second quarter, the slowest in three years. Household spending, the economy's key driver, has slowed for two quarters in a row as rising costs and President Rodrigo Duterte's tax increase discouraged spending.

A sliding peso has also pushed up the prices of imported goods, adding inflationary pressure. The local currency has fallen more than 7% against the dollar since the start of the year.

On Tuesday, the peso sunk to a fresh 12-year low against the greenback. Although this makes the remittances sent home by the millions of Filipinos working abroad, Emilio Neri, lead economist at Bank of the Philippine Islands, said inflation is negating this benefit.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media