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Philippine inflation picks up, but central bank keeps door open to easing

12/04/2020 | 12:26am EST
FILE PHOTO: Shops install a makeshift plastic barrier as a protection from coronavirus disease, in Quezon City

MANILA (Reuters) - Philippine inflation accelerated more quickly than expected in November, but the central bank played down the jump as "transitory" and kept the door open for further policy action to support the pandemic-hit economy.

The Consumer Price Index rose 3.3% last month from a year earlier, the fastest rise in 20 months, driven by spikes in food prices after a series of destructive typhoons.

The figure was well above the 2.6% median estimate in a Reuters poll and outside the central bank's projected range of 2.4% to 3.2% for the month. Core inflation, which excludes volatile food and fuel prices, quickened to 3.2% from 3.0% in October, the statistics agency said on Friday.

Inflation averaged 2.6% in the January-November period, well within the 2% to 4% target range for the year.

With the pandemic holding back consumer spending and business activity, the government has projected an economic contraction of 8.5%-9.5% for this year, worse than its previous forecast of a 5.5% slump.

The Philippine central bank, which last month delivered a surprise fifth interest rate cut this year to provide further support to the sputtering economy, has not shut the door on further easing.

"Uncertainty remains high following the resurgence of the virus in the U.S., Europe and parts of Asia," Bangko Sentral ng Pilipinas Governor Benjamin Diokno told reporters after the release of the inflation data.

He reiterated the central bank's readiness to "deploy its full arsenal of instruments" to support the economy and sounded a note of caution over the logistical challenges of distributing a coronavirus vaccine when it became available.

The central bank holds its last policy meeting this year on Dec. 17. ANZ economists said in a note that the surprise jump in inflation "will not derail the accommodative course of monetary policy".

(Reporting by Neil Jerome Morales and Enrico Dela Cruz; Editing by Ed Davies)

By Neil Jerome Morales and Enrico Dela Cruz


© Reuters 2020
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