Inflation Unexpectedly Slows In September

Spot USD/PHP holds above neutral levels following the release of the Philippines' monthly inflation report, which showed that consumer-price growth unexpectedly slowed in September. Headline inflation registered at +4.8% Y/Y, which came after prices rose 4.9% in August. Bloomberg consensus was looking for a +5.1% print.

• The Philippine Statistics Agency said that the slowdown in headline inflation was driven by slower increases in the costs of food and transport.
• CPI remains above Bangko Sentral ng Pilipinas' target range of +2.0%-4.0% Y/Y but printed at the lower end of the central bank's +4.8%-5.6% Y/Y forecast range for September.
• BSP Gov Diokno reiterated that recent price spikes are seen as a consequence of supply-side issues and are "best addressed by timely non-monetary measures." Diokno suggested that risks to CPI remain tilted to the upside this year, but inflation is expected to settle near the mid-point of the target range in 2022 and 2023.
• Separately, Pres Duterte confirmed his plan to retire from politics when his term expires next year, adding that he dropped his VP bid owing to its unfavourable reception among Philippine voters. Duterte noted that he will focus on preparing his defence for the imminent ICC probe into his violent anti-drug campaign.
• Spot USD/PHP sits +0.066 at PHP50.755 as we type, with bulls keeping an eye on the round figure/Sep 27 high of PHP51.000/51.036. A break here would expose Mar 18, 2020 high of PHP51.823. Bears look for a dip through the 50-DMA/Sep 24 low of PHP50.251/50.247.
• USD/PHP 1-month NDF last seen unch. at PHP51.000. Bears see yesterday's low of PHP50.610 as their initial target, bulls look for a jump above Sep 27 high of PHP51.520.