Economy 2 MIN READ

UPDATE 1-Philippine April inflation surges above 2022 target

May 5, 2022By Reuters

April CPI +4.9% y/y, exceeds market forecast chief has flagged possible June rate hike

Adds central bank and analyst comment, background

By Neil Jerome Morales and Enrico Dela Cruz

Philippine inflation in April climbed to the highest level since December 2018, increasing pressure on the central bank to tighten monetary policy, at a time when an economic recovery is showing signs of being on a firmer footing.

The consumer price index rose 4.9% last month from a year earlier, stronger than the median forecast for a 4.6% increase in a Reuters poll and near the top end of the central bank’s projected range of 4.2% to 5.0% for the month.

The surge was mainly attributed to increases in the heavily weighted food index and in energy and water utilities, the statistics agency said on Thursday.

While the headline figure was well above the central bank’s 2%-4% target band for this year, the January-April average remained within the range at 3.7%.

The Philippine Statistics Authority has said it would start releasing core inflation figures in May, calculated using a new 2018 base year.

Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno said the Monetary Board, which is scheduled to review policy settings on May 19, will take into account the inflation outlook along with macroeconomic prospects after the release of first-quarter gross domestic product data on May 12.

He said inflation risks remained tilted to the upside in 2022, but broadly balanced for 2023, and that the domestic economy has shown signs of a sustained recovery with the easing of pandemic restrictions.

Last week, Diokno said the BSP was looking at raising interest rates two to three times to bring down inflation by next year, with the first hike to be considered in June. [nL2N2WO0YV]

The BSP has kept the key overnight reverse repurchase facility rate PHCBIR=ECI at a record low of 2% since November 2020 to help the economy weather the pandemic.

“We’re going to have to be prepared to see inflation at these levels for quite some time,” Nicholas Mapa, senior economist at ING, told ANC News Channel.

“When we get behind or fall behind the curve, this is where the BSP is in increasing danger of having to react or overreact with ultra aggressive rate hikes.”

(Reporting by Neil Jerome Morales and Enrico dela Cruz
Editing by Ed Davies)


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