Philippine headline inflation accelerates in February, core inflation to remain elevated

Philippine headline inflation accelerated in February, coming in above market expectation. The consumer price inflation reached 4.5 percent year-on-year, above the upper bound of the central bank’s inflation target range of 2 percent to 4 percent. On a sequential basis, inflation came in at 0.8 percent, as compared with the prior month’s 1 percent.

Core inflation also accelerated in the month, coming in at 4.4 percent year-on-year. But on the updated 2012 base, headline inflation rose by a more benign 3.9 percent year-on-year, though it still marks a considerable acceleration from the January print of 3.4 percent year-on-year. The rise in inflation shows a combination of the effects of tax reforms, higher fuel costs and food prices.

According to an ANZ research report, core inflation is likely to remain elevated due to solid domestic demand.

“Despite these inflation readings, statements from central bank officials suggest a reluctance to tighten. We are accordingly, revisiting our call for a 25bps rate hike in March”, added ANZ.

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