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Philippine inflation picks up, but central bank keeps door open to easing

[MANILA] Philippine inflation accelerated more quickly than expected in November, but the central bank played down the jump as "transitory" and kept the door open for further policy action to support the pandemic-hit economy.

The Consumer Price Index rose 3.3 per cent last month from a year earlier, the fastest rise in 20 months, driven by spikes in food prices after a series of destructive typhoons.

The figure was well above the 2.6 per cent median estimate in a Reuters poll and outside the central bank's projected range of 2.4-3.2 per cent for the month.

Core inflation, which excludes volatile food and fuel prices, quickened to 3.2 per cent from 3 per cent in October, the statistics agency said on Friday.

Inflation averaged 2.6 per cent in the January-November period, well within the 2-4 per cent target range for the year.

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With the pandemic holding back consumer spending and business activity, the government has projected an economic contraction of 8.5-9.5 per cent for this year, worse than its previous forecast of a 5.5 per cent slump.

The Philippine central bank, which last month delivered a surprise fifth interest rate cut this year to provide further support to the sputtering economy, has not shut the door on further easing.

"Uncertainty remains high following the resurgence of the virus in the US, Europe and parts of Asia," Bangko Sentral ng Pilipinas governor Benjamin Diokno told reporters after the release of the inflation data.

He reiterated the central bank's readiness to "deploy its full arsenal of instruments" to support the economy and sounded a note of caution over the logistical challenges of distributing a coronavirus vaccine when it became available.

The central bank holds its last policy meeting this year on Dec 17. ANZ economists said in a note that the surprise jump in inflation "will not derail the accommodative course of monetary policy".


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