Inflation Firmer Than Expected, Rice & Transport The Pressure Points

Philippines Feb inflation printed stronger than expected. headline rose 3.4% y/y (versus 3.0% forecast and 2.8% prior). The m/m outcome rose 0.60% against a 0.3% projection (0.6% prior). Core inflation was 3.6% y/y, down from the 3.8% pace in Jan. Note core inflation peaked at 8.0% in March last year, so base effects are likely to help y/y momentum ease further next month.

• Rice inflation rose 23.7% y/y, a fresh high back to Feb 2009. It is expected this segment will remain elevated until the middle part of this year.
• In m/m terms by sub-sector, aggregate food rose 0.3%, versus 0.8% in Jan. Most other segments saw a similar rise to the Jan outcome. The exception was transport, which rose 1.3% m/m. This was the firmest rise since Aug last year.
• In y/y terms. food prices pick up to 4.6% from 3.5%. Transport rose to 1.2% y/y, from -0.3% prior. Other sub-indices were close their y/y pace in Jan.
• Whilst inflation pressures (outside of rice) and transport don't look dramatically different to the Jan pace, the BSP is still likely to take a prudent approach around the policy outlook. Our expectation is for a steady hand at the next policy meeting in early April (4th).