Philippines: Inflation surprised to the downside in February – UOB

UOB Group’s Senior Economist Julia Goh and Economist Loke Siew Ting assess the latest release of inflation figures in the Philippines.

Key Takeaways

“The Philippines’ headline inflation unexpectedly reversed course and moderated for the first time in six months to 8.6% y/y in Feb from a 14-year high of 8.7% in the preceding month. It defied our expectation and Bloomberg consensus for a continued acceleration to 9.1% and 8.9% respectively. The softer inflation outturn was primarily aided by lower prices of selected food items and fuels.”

“Despite slower headline inflation, both services and core inflation continued to see an uptick last month. Upside risks to the near-term inflation outlook remain owing to the prolonger Russia-Ukraine war, domestic policy changes, adverse weather, and currency volatility. We maintain our full-year average inflation forecast at 6.0% for this year (BSP est: 6.1%, 2022: 5.8%).”

“A one-month improvement in headline inflation reading is still not convincing enough for a rate pause by the BSP at the upcoming Monetary Board Meeting on 23 Mar. But, it may support a smaller quarter-point rate hike given that risks to the nation’s inflation outlook remain tilted to the upside and there are rising expectations for a higher US Fed Funds Target Rate. We stick to our call for a 25bps hike in the overnight reverse repurchase rate to 6.25% on 23 Mar.”