Headline inflation climbed to 4.9 percent year-on-year in July, hitting its highest rate since October 2011, in an acceleration that is expected to spark another tightening move by the central bank.
The new rate nearly doubled its 2.5 percent pace recorded in July 2013 and regained pace after slowing to 4.4 percent in June from 4.5 percent in May, data from the Philippine Statistics Authority (PSA) showed on Tuesday. The latest inflation figure was the highest since nearly three years ago, when it stood at 5.2 percent in October 2011.
Prices of heavily-weighted food and non-alcoholic beverages jumped and fueled the rise in the benchmark consumer price index (CPI) in the month under review.
Inflation in the year-to-date reached 4.3 percent, still within the government’s 3 percent to 5 percent full-year target range for 2014. But even when the rate eased in June from May, the Monetary Board of the Bangko Sentral ng Pilipinas (BSP) hiked its benchmark interest rates on overnight borrowing and lending facilities by 25 basis points.
BSP Governor Amando Tetangco Jr. said the monetary authority will continue to monitor developments and calibrate monetary policy, as needed, to help guide inflation expectations and address second-round effects that may develop.
“Even as we have already taken a series of policy actions to address liquidity growth and its attendant financial stability risks and to temper inflation expectations, we will not hesitate to use any of our tools to help guide the market to keep inflation within the target range over the policy horizon,” he said in a text message sent to reporters.
Food prices to rise further
The food index in Metro Manila rose to 8.2 percent in July from 7.8 percent in June, and rallied five times the 1.6 percent pace recorded a year earlier.
“This confirms our assessment that the economy could see more near-term increases in select food prices, partly due to weather-related supply concerns,” Tetangco said.
The BSP Governor stressed the central bank is closely coordinating with other government agencies to develop solutions to the supply constraints.
In areas outside Metro Manila, food-alone inflation hit 8.8 percent in July, up from 7.8 percent the month before and significantly higher than the year-on-year rate of 2.4 percent.
“This was primarily brought about by the upward price adjustments in the heavily-weighted food items such as rice, fruits, vegetables, meat, fish, milk and eggs. Price mark-ups in gasoline nationwide and higher prices in medicines and selected items for personal care in many regions were also recorded during the month,” the statement accompanying the data said.
Faster annual hikes in the indices of housing, water, electricity, gas and other fuels; health; transport; recreation and culture; and education were also noted by the PSA.