Philippine central bank ready to take further action as inflation nears 14-year high

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THE Philippine central bank said on Friday (Nov 4) it was ready to take all further monetary policy actions needed to bring inflation back within target, after data showed the headline rate reaching its fastest pace in nearly 14 years in October.

The consumer price index climbed 7.7 per cent in October from a year earlier, the fastest rise since December 2008, driven by price gains in key commodity groups, particularly food and non-alcoholic beverages. It outpaced the 7.1 per cent median forecast in a Reuters poll.

The headline figure also came in near the top end of the central bank's 7.1 per cent to 7.9 per cent forecast for the month.

Inflation in January to October averaged 5.4 per cent, well outside the central bank's full-year target range of 2 per cent to 4 per cent.

Indicating broadening price pressures, core inflation - which strips out volatile food and fuel - hit 5.9 per cent in October from an upwardly revised 5.0 per cent in September, the Philippine Statistics Authority said.

The statistics agency sees a "substantial probability" that inflation could increase further in November, partly because of the impact of a recent destructive storm.

"The risks to the inflation outlook appear to be tilted to the upside for 2022 and 2023, but are seen to be broadly balanced for 2024," the Bangko Sentral ng Pilipinas (BSP) said in a statement.

The BSP, which has so far raised rates five times this year by a total of 225 basis points (bps) to 4.25 per cent, said it remained "prepared to take all further monetary policy actions necessary to bring inflation back to the target over the medium term".

On Thursday, BSP governor Felipe Medalla said the central bank will hike key interest rates by 75 bps at its Nov 17 meeting to match the latest US Federal Reserve tightening and temper any impact on the peso-US dollar rate.

The peso, South-east Asia's worst-performing currency, has lost more than 13 per cent against the US dollar this year.

"We expect the central bank to hike again in December, likely matching any move from the Fed to close out the year," said ING senior economist Nicholas Mapa.

To tame inflation, the government will address supply shocks and bottlenecks driving prices of key commodities higher, and look at extending an executive order lowering tariffs on pork, rice, corn, and coal, Finance Secretary Benjamin Diokno said.

President Ferdinand Marcos Jr vowed to continue supporting the poor via cash aid and fuel discounts to ease the inflation pain. REUTERS

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