Philippine inflation likely accelerate for fifth straight month

Philippine inflation likely accelerated for the fifth straight month in May, a Reuters poll showed, but analysts were divided over when the central bank will again raise interest rates.

The median forecast in a survey of 10 analysts was for the consumer price index to rise 4.9 per cent in May from a year earlier, marking the third consecutive month that the headline figure is above the central bank’s 2-4 per cent target for this year.

That would be the fastest CPI increase in at least five years. The Philippine Statistics Authority, which has shifted to a new base year in computing inflation, is yet to release updated figures for years before 2013, reports Reuters.

The central bank had forecast an inflation range of 4.6-5.4 per cent for May, taking into account higher fuel costs, blamed on geopolitical tensions in the Middle East, and rice prices.

The Philippine peso’s weakness versus the US dollar, higher taxes, and still-robust domestic demand likely also added pressure on inflation, analysts said.

The central bank increased policy rates by 25 basis points on May 10 for the first time in more than three years to tame price pressures and manage inflation expectations.

Of the six analysts who gave their forecasts on the policy rate, only one projected another rate hike at the central bank’s next policy review scheduled on June 21.

Three of them forecast a rate increase in the third quarter, while one saw it happening “towards the end of 2018”. One believed there will be no more rate adjustment within the year.

Philippine President Rodrigo Duterte himself is worried about how rising consumer prices erode the purchasing power especially of the poor, telling central bank officials recently to “remain vigilant in ensuring price and financial stability”.