Philippine inflation accelerates in July, cements rate hike expectations

MANILA (Reuters) – Philippine annual inflation accelerated in July and moved further away from the central bank’s comfort range, cementing expectations for further policy tightening this week.

Inflation quickened to 5.7 percent in July, the fastest rise in over five years, due to higher food and transport costs, the National Economic Development Authority said.

It was higher than the 5.5 percent median forecast in a Reuters’ poll, and near the top end of the central bank’s 5.1-5.8 percent estimate for the month.

July’s inflation print marked the fifth straight month the rate has breached the central bank’s 2-4 percent target for the year, leading some analysts to believe policymakers would deliver as much as a 50-basis-points rate hike on Thursday.

The central bank, which is due to meet on Aug. 9, raised its benchmark interest rate by 25 basis points each in May and June, to tame inflation and shore up the peso, which has been battered by concerns over a widening current account deficit and capital outflows.

“The BSP (central bank) still has to continue raising rates to assure consumers and the market that inflation is well anchored,” Bank of the Philippine Islands economist Emilio Neri told news channel ANC.

The peso has lost 5.7 percent against the dollar this year, making it one of Asia’s worst performing currencies.

Some analysts expect annual inflation to peak in August as upward price pressure from fuel and food is likely to moderate and come back within the central bank’s target range.

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