Philippines inflation near 4-year high, cements prospect of further rate hikes

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  • June headline CPI +6.1% y/y, faster than market forecast
  • January to June inflation at 4.4% exceeds the target range of 2% to 4%

MANILA, July 5 (Reuters) – Inflation in the Philippines hit its highest level in nearly four years in June, bolstering expectations of another interest rate hike and raising the prospect of more aggressive action from the central bank to ease price pressures.

The consumer price index rose 6.1% in June year on year (PHCPI=ECI), marking the third month in a row that inflation has been above the official target range of 2% to 4%, mainly due to rising transportation and utility costs, as well as food. prices, the statistics agency said on Tuesday.

The Philippine Statistics Authority has yet to release core inflation figures since switching to the new base year 2018 to determine changes in consumer prices.

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The headline figure beat the median forecast of 5.9% in a Reuters poll, but was within the range of 5.7% to 6.5% projected by the central bank for the month.

Inflation in the first half averaged 4.4%.

The Bangko Sentral ng Pilipinas (BSP) may consider larger interest rate hikes to support a weak Philippine peso and contain inflation, but will not be forced to match the US Federal Reserve’s policy tightening, Governor Felipe Medalla said last week. Read more

Speaking ahead of the June inflation data, Robert Dan Roces, an economist at the Security Bank in Manila, said the BSP Monetary Board “may consider a one-time preemptive hike in policy rates of 50 basis points during its meeting on August 18 if inflation is on the rise the risks remain persistent.

The BSP tightened its monetary policy to curb inflationary pressures with consecutive rate hikes of 25 basis points in May and June (PHCBIR=ECI).

A weakened peso could also contribute to higher inflation, while limiting the purchasing power of consumers.

The narrowing interest rate differential in the Philippines and the United States weighed on the peso, which is trading near a 17-year low against the US dollar.

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Reporting by Enrico Dela Cruz and Karen Lema Editing by Ed Davies

Our standards: The Thomson Reuters Trust Principles.

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