Philippine June inflation rate quickens to 5.2%, hits 5-year high

[MANILA] Philippine annual inflation rate picked up faster than expected in June to the highest in more than five years due to costlier food and non-alcoholic beverages, according to data released on Thursday, raising chances of a third interest rate hike this year.

The consumer price index stood at 5.2 per cent in June, above the 4.8 per cent forecast in a Reuters poll of economists, bringing the average inflation rate to 4.3 per cent in the first half of the year.

Last month's inflation print marked the fourth month that the pace of price increase was faster than the central bank's 2-4 per cent comfort range for this year and next, leaving the door open for a third rate hike this year.

Rising inflation, blamed on higher taxes on fuel and other commodity items, a weak peso, and firmer global oil prices, has prompted the central bank to raise interest rates in May and in June.

While the rise in consumer prices is largely supply-driven, the central bank has said a tighter monetary policy was needed to keep inflation expectations from spiking.

Higher interest rates should also provide support for the peso, which has lost nearly 7 per cent against the dollar, making it one of Asia's worst performing currencies.

The Philippines, like other Asian economies that have external deficits, faces pressure to follow the US Federal Reserve in shifting away from low interest rate settings or risk capital flight as investors seek higher yielding assets.

The central bank next meets to review policy on Aug 9.

REUTERS