February inflation at 8.6%

PHILIPPINES - In Brief 07 Mar 2023 by Romeo Bernardo
The headline inflation rate slid from a 15-year high of 8.7% in January to 8.6% in February. It was below analysts’ expectations (8.9% median) and within the BSP’s forecast for the month (8.5% to 9.6%) but it basically reflected unchanged prices on the average, i.e., zero month-on-month inflation. The 1% drop in food prices, due mainly to a 12% decline in vegetable prices, was offset by higher prices of non-food as well as alcoholic and non-alcoholic beverages. Core inflation remained on the uptrend, rising from 7.4% in January to 7.8% last month, as prices of services continued to rise. Governor Felipe Medalla had earlier signaled that a rate hike is likely when the Monetary Board meets on March 23. By itself, today’s inflation print, particularly rising core inflation, should not change this planned course of action. We think a 25bp increase in policy rates likely but cannot rule out another 50bp hike. For now, we are keeping our 6.5% inflation forecast for the year based on what we wrote in our forecast report last week: (a) political dimensions of food shortages that have kept food prices high, (b) anticipated wage and transport fare adjustments, and (c) projected electricity shortages that will likely push up power rates in the summer months.

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