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August 5, 2020
MANILA (Reuters) – Philippine inflation accelerated for a second straight month in July as the easing of coronavirus lockdowns revived consumer demand, but price pressures remained subdued, giving the central bank room for further monetary policy easing if needed.
The consumer price index rose 2.7% in July from a year earlier <PHCPI=ECI>, the fastest pace in six months, driven by increases in transport, utility, alcoholic beverages and tobacco prices, the Philippine Statistics Authority said on Wednesday.
It was near the upper end of the central bank’s forecast range of 2.2% to 3.0% for the month, and faster than the median 2.5% estimate in a Reuters’ poll, which matched the previous month’s rate.
Core inflation, which excludes volatile food and fuel prices, was 3.3%, versus 3.0% in June <PHCPXY=ECI>.
Tame inflation has allowed the Philippines central bank to cut its benchmark interest rate <PHCBIR=ECI> by a total of 175 basis points this year to a record-low of 2.25% to help resuscitate an economy battered by the pandemic.
But the government’s decision to place areas in and around the capital back under a lockdown from Tuesday to stem the tide of new COVID-19 cases has dashed hopes for a swifter economic recovery and supports the case for further policy easing.
Quarterly growth data due on Thursday will likely show the economy suffered a 9.0% contraction in the April-June period, based on a Reuters poll, deeper than the first quarter’s 0.2% decline, piling pressure on authorities to provide fresh stimulus to aid businesses and a rising number of unemployed.
Farm output, which usually accounts for less than 10% of overall economic output, grew at an annual pace of 0.5% in the second quarter, while trade data for the month of June showed slower contractions in export and imports.
“Any bigger contraction in Q2 GDP data may lead to further monetary easing measures especially by way of a cut in banks’ RRR (reserve requirement ratio), as support may be needed most by the economy at this time,” said Michael Ricafort, economist at Rizal Commercial Banking Corp.
(Reporting by Neil Jerome Morales and Karen Lema; Editing by Ed Davies)
