Philippine Inflation Rises to 3.4% in February, Driven by Food Prices

The Philippines saw a break from a four-month trend of declining inflation as it accelerated to 3.4% in February, primarily due to the surge in the prices of key food items, including rice. This increase, which is notably higher than January’s 2.8% inflation rate, aligns with the Bangko Sentral ng Pilipinas’ (BSP) inflation forecast range of 2.8% to 3.6% for the month. The February data also marks the third consecutive month that inflation has remained within the government’s target range of 2% to 4%.

Despite this uptick, the Monetary Board maintained its benchmark interest rate at 6.5% during its last meeting, the highest in over 16 years. This decision was described as “prudent” by the BSP, given the ongoing risks to the inflation outlook, including higher transportation charges, electricity rates, oil prices, and domestic food costs. The central bank also expressed concerns about the potential impact of a strong El Niño episode on food prices.

Looking ahead, the BSP anticipates a slight ease in inflation during the first quarter of the year, with a possibility of it exceeding the target range in the second quarter as favorable base effects diminish. However, inflation is expected to realign with the target band by the third quarter, closing the year with an average rate of 3.6%, slightly below the BSP’s previous forecast of 3.7%.

This recent development highlights the delicate balance the Philippines must navigate in managing inflationary pressures while fostering economic growth, especially in the face of global economic uncertainties and domestic challenges such as weather-related disruptions.