Philippine inflation halts four-month slowdown on costlier rice

PHILIPPINE inflation accelerated again in February after four months of easing as rice costs sustained their uptick, bolstering the case for the central bank to maintain borrowing costs near a 17-year high.

Consumer prices rose 3.4 per cent on-year last month, according to a statistics agency report on Tuesday (Mar 5). The print exceeded the 3 per cent median estimate of economists in a Bloomberg survey and snapped the downtrend that started in October.

Faster food and drinks inflation drove the headline figure, with rice costs quickening 23.7 per cent compared to a year ago – the highest level since February 2009. Transport inflation last month also turned positive from a contraction in January, while price increases of utilities also accelerated.

The inflation pickup in February builds the case for the Bangko Sentral ng Pilipinas (BSP) to maintain its key interest rate at the highest level since May 2007, even after it signalled last month that price risks are waning. The next policy decision is scheduled on Apr 4.

In a statement after the inflation data release, the BSP said it is appropriate to keep monetary policy settings unchanged in the near term, noting that price increases could quicken temporarily above its 2 to 4 per cent target from next quarter as the El Nino dry weather impacts harvests.

The monetary authority also said that risks to inflation outlook have receded but remain tilted towards the upside, citing higher transport and power costs as well as costlier food due to El Nino. BLOOMBERG