Inflation rises to 5.7%

PHILIPPINES - In Brief 07 Aug 2018 by Romeo Bernardo
July inflation rate reached 5.7%, near the upper end of the forecast ranges of the BSP (5.1-5.8%) and private analysts (5.4-5.8%); rising as well from the surprisingly high 5.2% print in June. The higher headline rate may be traced largely to higher prices of food and non-alcoholic beverages and fuel-related products and to a smaller extent on health services, restaurant and miscellaneous goods and services as well as further tax increases for alcohol and tobacco products under TRAIN. Although the monthly price increase decelerated slightly from 0.6% in June to 0.5% in July, we think second round impacts have started to show more evidently in last month’s inflation outturn. We are raising our inflation forecast to near 5% for the full year (from 4.6% in our last outlook report), expecting the headline rate to peak near 6% this quarter. In our view, July’s inflation print is strong enough to warrant the “strong” response that the BSP governor signaled earlier. Hence, we expect a rare 50bp hike in policy rates on Thursday.

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