Slower Philippines inflation supports another rate cut
The central bank has slashed its key rate by 175 basis points since August last year
[MANILA] Philippine inflation slowed in November, supporting another cut in the central bank’s benchmark interest rate next week as a graft scandal hits consumer and investor confidence.
Consumer prices rose 1.5 per cent last month from a year ago, the Philippine Statistics Authority said on Friday (Dec 5). That was lower than the 1.7 per cent rate in October and the median estimate in a Bloomberg News survey.
It marked the ninth straight month that inflation came in below the Bangko Sentral ng Pilipinas’ 2 to 4 per cent target, helped by a decline in rice prices in previous months.
“The outlook for inflation is generally benign, remaining well within the target range over the policy horizon,” the BSP said in a statement. The risks to the inflation outlook are limited as supply-side pressures are expected to ease, it added.
Slower price increases in food, including vegetable and non-alcoholic beverages, led to the lower inflation rate, Deputy National Statistician Divina Gracia Del Prado said in a briefing. Core inflation, which excludes some food and energy items, eased to 2.4 per cent from 2.5 per cent in October.
Two typhoons slammed the Philippines last month, causing severe flooding and damage to crops. But prices of rice, which accounts for around 9 per cent of the consumer basket, continued to decline amid plentiful supply with the harvest season underway and as storm-hit areas were not big rice producers, according to officials.
BSP governor Eli Remolona has said monetary authorities will consider another reduction in the benchmark interest rate next week to help spur demand, with inflation expectations more or less anchored. The policymaking Monetary Board will hold its rate-setting meeting on Dec 11.
“The Monetary Board likewise noted that the outlook for domestic economic growth has weakened. This outlook reflects in part the impact on business confidence of governance concerns about public infrastructure spending as well as lingering uncertainty from the external environment,” the central bank statement said.
The ongoing graft scandal over flood infrastructure in the South-east Asian nation has hit consumer demand and investor sentiment, causing economic growth to slump to a four-year low in the third quarter.
The central bank has slashed its key rate by 175 basis points since August last year. The overnight target reverse repurchase rate stands at 4.75 per cent, the lowest since September 2022. BLOOMBERG
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