MANILA (Reuters) - Philippine annual inflation accelerated in July and moved further away from the central bank’s comfort range, strengthening expectations for further policy tightening this week.
Inflation quickened to 5.7 percent in July, the fastest rise in over five years, due to higher food and transport costs, the National Economic Development Authority said.
It was higher than the 5.5 percent median forecast in a Reuters poll, and near the top end of the central bank’s 5.1-5.8 percent estimate for the month.
Bangko Sentral ng Pilipinas Governor Nestor Espenilla signaled the uptick in inflation required a policy response, and the only question that needs to be answered is how strong should it be.
“We will consider all the latest data updates in determining the strength of our follow-through response in the upcoming policy meeting,” Espenilla told reporters via mobile phone message shortly after the data was released.
July’s inflation print marked the fifth straight month the rate has breached the central bank’s 2-4 percent target for this year and next, leading some analysts to believe policymakers would deliver as much as a 50-basis-points rate hike on Thursday.
Espenilla said the central bank was sticking with its view that inflation will return to its target by 2019.
The central bank, which is due to meet on Aug. 9, raised its benchmark interest rate PHCBIR=ECI by 25 basis points each in May and June, to tame inflation and shore up the peso, which has been battered by concerns over a widening current account deficit and capital outflows.
“The BSP (central bank) still has to continue raising rates to assure consumers and the market that inflation is well anchored,” Bank of the Philippine Islands economist Emilio Neri told news channel ANC.
The peso has lost 5.7 percent against the dollar this year, making it one of Asia’s worst performing currencies.
Additional reporting by Enrico dela Cruz and Martin Petty; Editing by Sunil Nair and Gopakumar Warrier