Philippines CPI at more than 5-year high adds to rate hike calls

[MANILA] Consumer prices in the Philippines increased at the fastest pace in more than five years in March, adding to pressure on the central bank to raise interest rates.

The inflation rate rose to 4.3 per cent from a revised 3.8 per cent in February, the Philippine Statistics Authority said in a statement posted on its website on Thursday. That exceeded the median estimate in a Bloomberg survey of seven economists and was the quickest since at least January 2013, based on data provided by the statistics agency.

Bangko Sentral ng Pilipinas has resisted calls to tighten monetary policy and last month forecast annual inflation to return to the target range of 2 per cent to 4 per cent in 2019. Price pressure is mounting after a tax law that raised levies on fuel, sugary drinks and cigarettes was implemented in January.

"The inflation data today tells you that consumer price rise is broader than originally thought," said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore.

"Rate hikes are on the cards probably as early May. The case for BSP to hike sooner rather than later is strengthening."

RATE DEBATE

The peso fell 0.1 per cent to 52.13 per US dollar as of 10.04am in Manila, taking its decline this year to 4.2 per cent.

The majority of economists surveyed in February and March forecast the benchmark rate will be raised from a record-low 3 per cent this quarter. But with officials signaling no rush to tighten policy, there is still debate on the rate outlook.

"The central bank has been very clear in saying that inflation is still within their target range" and may not move its key rates in the immediate future, said Jill Singian, a government bond trader at Bank of the Philippine Islands in Manila.

ING Groep NV sees higher prices this year but forecast rates will remain unchanged as inflation will slow.

"The central bank won't raise rates," said Joey Cuyegkeng, a senior economist at ING in Manila.

"It's all in line with the central bank's expectations that inflation will continue to rise and eventually will turn more moderate."

BLOOMBERG