Surging Philippine prices boost the case for another rate hike

A worker sorts grocery items at a supermarket in Las Pinas, Philippines. (Reuters pic)

MANILA: Consumer prices in the Philippines increased at the fastest pace in more than five years in July, boosting the case for the central bank to raise interest rates again this week.

Inflation quickened to 5.7% from 5.2% in June, the Philippine Statistics Authority said in a statement posted on its website Tuesday. That exceeded the 5.5% median estimate in a Bloomberg survey of economists and was the quickest since at least January 2013, based on data provided by the statistics agency.

Central bank Governor Nestor Espenilla is under pressure to deliver on his pledge for “strong” action on Thursday to rein in inflation. The majority of economists predict an increase in the benchmark rate to 4% from 3.5%, with the rest forecasting a hike to 3.75%.

“This requires a strong monetary adjustment consistent with what the governor has been saying,” said Angelo Taningco, an economist at Security Bank Corp. in Manila, who predicts a 50 basis point hike in the benchmark rate this week.

The peso was little changed at 52.885 per dollar as of 9.48 am in Manila.

Food and non-alcoholic beverage costs rose 7.1% from a year earlier, while transport costs increased 7.9%.

Prices of rice, the country’s staple grain, climbed to a record in July. Rice is the second-largest item in the Philippines’ consumer basket. Minimum fares for jeepneys — a main form of transport — were also raised in Manila and nearby provinces last month.