Philippine inflation surges to 7.8%, boosting case for rate hike

Philippine inflation accelerated to its fastest pace in almost four years in October as the prolonged Middle East conflict drove up the cost of fuel, electricity and transport in a nation heavily reliant on the region for its energy supplies.

Consumer prices hit 7.8% last month from a year earlier, the highest since an 8.6% print in February 2023, the Philippine Statistics Authority said Thursday. Inflation was 7.2% in September, and the median estimate in a Bloomberg News survey put October’s number at 7.6%.

The acceleration was mainly driven by a jump in transport costs, the authority said. Another factor was a “faster annual increase observed in the housing, water, electricity, gas and other fuels index.”

The Bangko Sentral ng Pilipinas is in the midst of a tightening cycle that included a surprise 50 basis-point rate hike in October to rein in spiraling costs. The central bank had previously said it expected inflation in October to come in between 7.1% to 8.1%.

The Philippine economy is coming under pressure on multiple fronts after posting the second-weakest growth among Southeast Asia’s major economies in the second quarter.

President Ferdinand Marcos Jr’s administration is contending with surging oil prices and a peso at record lows as the Middle East conflict drives up energy costs, while consumer spending is losing steam, business confidence is weakening and El Niño is straining the economy – all with just 18 months to go before the 2028 election.