Philippine inflation tops estimates on pricier food, fuel

MANILA: Philippine inflation surged in September, surpassing economists' expectations, due to rising food and fuel prices, signaling potential for the central bank to increase the policy rate further, reports Reuters. Consumer prices climbed 7.2% year-on-year, outpacing the median forecast of 6.8% in a Bloomberg News survey. The uptick can be attributed to the impact of monsoon rains, which caused extensive flooding that damaged farms, resulting in higher prices for rice and vegetables.

Additionally, gasoline and diesel costs have increased as oil prices rose following renewed conflict in the Middle East. This inflation spike supports the Bangko Sentral ng Pilipinas' (central bank) decision to tighten monetary policy, with the bank having raised interest rates by 75 basis points since April. Governor Eli Remolona cautioned about further price risks stemming from the El Nino weather phenomenon and wage increases.

The central bank's next policy decision is set for October 22. The inflation report also highlighted additional inflationary threats, particularly on food items such as rice. The benchmark stock index declined in value after the inflation data was released, and the Philippine peso weakened against the US dollar. Inflation has been above the central bank's 3% target since the Iran war caused a global energy supply disruption, leading to oil price surges that affected import-dependent countries like the Philippines.

The peso's depreciation against the US dollar has also intensified inflation. Elevated inflation risks could further slow consumption in the Philippines, which had the second-lowest growth among major Southeast Asian economies in the second quarter.