Philippines Inflation Still at Risk From Food Supply Strain

(Bloomberg) — Philippine inflation quickened for a third straight month in April, and the continued strain on food supply may keep prices under pressure and prompt the central bank to hold its key rate at a 17-year high.

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Consumer prices rose 3.8% on-year last month, according to government data released on Tuesday. That was slower than the median 4.1% gain estimated by economists in a Bloomberg survey. Rice inflation slowed for the first time in six months, coming in at 23.9% from 24.4% in March.

The latest print is in line with the Bangko Sentral ng Pilipinas’ “expectations that inflation could accelerate temporarily above the target range in the next two quarters of the year” due to the impact of adverse weather conditions on the country’s agricultural output,” the central bank said in a statement.

Still, BSP said it expects average inflation to return to its 2%-4% goal for this year and next. The April number was within the central bank’s 3.5% to 4.3% forecast range.

BSP Governor Eli Remolona flagged last month an increasing risk of inflation breaching the central bank’s target for a third straight year in 2024. Persistent price pressures are building a case for the central bank to hold its key interest rate at 6.5% at a meeting next week, and delay a pivot to monetary easing possibly to next year.

Read More: Philippine Rate Cut More Likely in 2025 on Inflation Risks

The swing to La Niña from El Niño may compound the strain on the Philippines’ food supply, Economic Planning Secretary Arsenio Balisacan said. “We are taking comprehensive measures to ensure food security amid geopolitical concerns and weather patterns worsened by climate change,” he said in a statement.

La Niña tends to bring more rains to parts of Asia and usually follows the El Niño dry weather phenomenon.

“Our actions aim to boost local production and prepare for any challenges in food supply and price upticks,” Balisacan added.

The central bank said it will consider the latest inflation number as well as first-quarter gross domestic product data — due out on Thursday — in its next monetary policy meeting on May 16.

The slower than expected inflation “would bode well and still support the view of steady local policy rates” at next week’s meeting, said Michael Ricafort, chief economist at Rizal Commercial Banking Corp.

–With assistance from Manolo Serapio Jr., Cliff Venzon and Tomoko Sato.

(Updates with details throughout.)

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