UPDATE 2-Philippines inflation slows in October, eases rate hike pressure

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By Neil Jerome Morales and Mikhail Flores

MANILA, Nov 7 (Reuters) – Philippine annual inflation slowed for the first time in three months in October due mainly to slower increases in prices for food including rice, the statistics agency said on Tuesday, likely easing pressure on the central bank to hike interest rates further.

The consumer price index rose 4.9%, less than the 6.1% in September, 5.6% forecast in a Reuters poll, and the central bank’s 5.1% to 5.9% projection.

Slower food inflation, caused in part by deceleration in rice price inflation to 13.2% in October from 17.9% in September, helped cool consumer prices last month. Excluding volatile food and energy prices, core inflation eased to 5.3% from 5.9% in the prior month.

But year-to-date average inflation of 6.4% over January-October remained well outside the central bank’s 2% to 4% comfort range for the year.

“It is crucial to continue monitoring the prices of commodities, particularly food, transportation, and energy, amid global challenges such as geopolitical uncertainties and El Niño,” said Economic Planning Secretary Arsenio Balisacan.

Worried that inflation could spiral out of hand, the central bank delivered an off-cycle hike of 25 basis points on Oct. 26, and left the door open to another hike at its meeting on Nov. 16 if the inflation situation worsened.

Michael Ricafort, an economist at Rizal Commercial Banking, said the slower inflation in October, coupled by a strong peso and lower global crude oil prices, “would support a pause in local policy rates, or at least reduce the urgency for further rate hikes”.

By the time the central bank meets next week, it would have third-quarter annual economic growth date which, according to Finance Secretary Benjamin Diokno, would better second-quarter growth of 4.3%.

But the government also reported data on Tuesday which showed exports contracted 6.3% in September from a year earlier, while imports shrank 14.7%.

The finance secretary, a member of the central bank’s policymaking Monetary Board, said on Monday he would vote to keep the benchmark interest rate PHCBIR=ECI steady at 6.5%.

(Reporting by Neil Jerome Morales and Mikhail Flores; Writing by Karen Lema; Editing by Kanupriya Kapoor and Christopher Cushing)

((neiljerome.morales@thomsonreuters.com))