Philippine inflation cools below estimate in boon for rate cuts

PHILIPPINE inflation eased to the slowest in seven months in August and fell back to within the central bank’s target, increasing policymakers’ scope to sustain their easing cycle.

Consumer prices rose 3.3 per cent on-year last month as food price gains cooled, particularly the staple rice, the statistics agency said on Thursday (Sep 5). That was the slowest print since January and was below the 3.6 per cent median estimate in a Bloomberg News survey.

The latest data widens the Bangko Sentral ng Pilipinas’ (BSP) room for more rate cuts after a 25-basis-point reduction in August that it implemented even after inflation spiked above its 2 to 4 per cent target the previous month. Governor Eli Remolona had since signalled another quarter-point cut in October or December.

Rice inflation slowed to 14.7 per cent in August from a year ago after months of hovering above 20 per cent. Transportation costs also eased last month, dropping 0.2 per cent from a 3.6 per cent increase in July, according to the statistics agency.

The BSP’s key rate at 6.25 per cent remains at the highest level in 17 years after policymakers delivered their most aggressive policy tightening in two decades to rein in prices.

“The sustained easing of inflation will support growth in household consumption, which elevated prices have long suppressed,” Economic Planning Secretary Arsenio Balisacan said. The recent stability in inflation will encourage investment with borrowing costs declining. BLOOMBERG