Copy of 2023-02-07T041159Z_870856115_RC236Z9P1EKF_RTRMADP_3_PHILIPPINE-MARKETS-1675780019445
Housing and utilities costs increased by 8.5%. Core inflation, which strips out volatile food and energy items, quickened to 7.4% in January from 6.9%. Image Credit: REUTERS

Manila: Philippine inflation quickened to a fresh 14-year high, defying all expectations including that of the central bank’s and spurring bets of sustained policy rate increases to quell broadening price pressure.

Consumer prices rose 8.7 per cent in January from a year ago, Philippine Statistics Authority reported on Tuesday. That compares with 8.1 per cent in December and a median estimate of 7.6 per cent in a Bloomberg survey. Bangko Sentral ng Pilipinas had forecast last month’s inflation at 7.5 per cent-8.3 per cent.

“There are risks associated with relatively high inflation across different commodity groups,” National Statistician Dennis Mapa said at a briefing in Manila. The source of inflation is wide because the risk has spread, he said.

The January print “- the fastest since November 2008 “- went against earlier projections by some monetary officials that inflation probably peaked in December, suggesting that the rate pause which the Governor Felipe Medalla had pegged likely by the end of this quarter, will be delayed. The data also diverged from slowing trends in Indonesia and Thailand.

Way past the target

Nine out of thirteen categories including food, transport and utilities reported inflation past the central bank’s 4 per cent upper-bound target, indicating that this price surge is broad-based, said Nicholas Mapa, an economist at ING Groep NV in Manila. “We believe Governor Medalla will whip out a 50-basis-point rate increase in an attempt to get ahead of surging inflation” next week.

Medalla over the weekend said BSP will focus on inflationary expectations when it meets to set policy on February 16.

Food inflation in January accelerated to 10.7 per cent year-on-year from 10.2 per cent, according to Tuesday’s data. Housing and utilities costs increased by 8.5 per cent. Core inflation, which strips out volatile food and energy items, quickened to 7.4 per cent in January from 6.9 per cent.