(March 5): The Philippines’ inflation rate rose to the fastest pace in over a year in February, putting the Southeast Asian economy in a delicate position ahead of the expected surge in prices of goods in the wake of the war in Iran.
Consumer prices increased 2.4% last month from a year ago, the Philippine Statistics Authority said on Thursday. That matched the median estimate in a Bloomberg News survey and compares with the 2% recorded in January.
Price pressures would narrow the space for further monetary easing at a time when economic momentum remains weak. The Bangko Sentral ng Pilipinas, which aims to keep inflation within the 2%-4% range, has reduced its key rate by 225 basis points so far and signalled it could be nearing the end of the easing cycle that began in August 2024.
Markets appear unaffected by the quicker inflation data with the peso edging 0.2% higher against the dollar at 10.35am in Manila and the main stock index was up 0.5%.
The central bank said its policymaking Monetary Board will keep a close eye on incoming data, specifically on inflation. “We are watchful of the recent developments in the Middle East for their implications on near-term inflation and economic activity,” the BSP said in a statement.
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The BSP said it “will ensure that policy settings remain in line with its pursuit of price stability conducive to sustainable growth and employment”.
Inflation is expected to accelerate anew in coming months as the Iran war deepens, risking a sustained disruption in global oil supply. The Philippines, which relies heavily on fuel and food imports, is widely seen by economists as one of the most vulnerable in the region to inflation and growth risks spurred by the conflict.
These concerns have already driven the Philippine peso lower, which could further broaden imported inflation and limit the central bank’s ability to reduce borrowing costs.
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The latest cut in the central bank’s benchmark interest rate in February came after the nation’s economic growth slowed to 3% in October-December, the weakest pace in 14 years outside of the pandemic. BSP Governor Eli Remolona last month said monetary policy “cannot do much more” to support economic growth at this point.
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