Philip­pine cbank pledges ac­tion as CPI surges

The Pak Banker - - FRONT PAGE - -AP

MANILA: The Philip­pine cen­tral bank pledged to take timely ac­tion af­ter data showed con­sumer prices in­creased at the fastest pace in more than three years in Jan­uary. Stocks and the peso fell. In­fla­tion rose to 4 per­cent, up from 3.3 per­cent in De­cem­ber, the Philip­pine Statis­tics Author­ity said in an emailed state­ment on Tues­day, as the costs of food, bev­er­ages and to­bacco rose. That ex­ceeded all fore­casts in a sur­vey of econ­o­mists.

The onus is now on Bangko Sen­tral ng Pilip­inas to start tight­en­ing mon­e­tary pol­icy, or at least sig­nal a more hawk­ish stance when it de­cides on in­ter­est rates on Thurs­day. Gover­nor Nestor Espe­nilla at­trib­uted the surge in prices to the im­ple­men­ta­tion last month of the tax law that raised levies on fuel, sug­ary drinks and cig­a­rettes, and higher oil and food cost.

"We think th­ese are tem­po­rary driv­ers of in­fla­tion and would even­tu­ally sta­bi­lize," Espe­nilla said in a mo­bile-phone text mes­sage on Tues­day. "Nev­er­the­less, BSP will be closely mon­i­tor­ing the sit­u­a­tion and stands ready to take timely ac­tion based on our eval­u­a­tion of all rel­e­vant data."

Most econ­o­mists sur­veyed be­fore the in­fla­tion data pre­dicted the rate would be held at 3 per­cent. The cen­tral bank's tar­get is to keep in­fla­tion at an aver­age of 2 per­cent to 4 per­cent from 2018 to 2020.

"A rate hike looks im­mi­nent from the Philip­pines," said Gundy Cahyadi, an econ­o­mist at DBS Group Hold­ings Ltd. in Sin­ga­pore, who is one of three an­a­lysts pre­dict­ing a 25 ba­sis­point hike on Thurs­day. "There's def­i­nitely up­ward pres­sure on in­fla­tion. The re­vised taxes does have a min­i­mal price ef­fect, but what's more im­por­tant is its im­pact on in­fla­tion ex­pec­ta­tions."

"We haven't seen in­fla­tion this high in re­cent years," John Padilla, who helps man­age 460 bil­lion pe­sos ($8.9 bil­lion) as head of eq­ui­ties at Metropoli­tan Bank & Trust Co. in Manila. "It will make peo­ple step back and ask if this is the start of a new cy­cle, so the cost of busi­ness will be higher and earn­ings will be crimped."

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