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Inflation gains keeping Southeast Asia central bankers on edge

A protester holds a placard as they demonstrate in front of a market in Manila on March 15, 2022. (PHOTO: Ted ALJIBE / AFP)
A protester holds a placard as they demonstrate in front of a market in Manila on March 15, 2022. (PHOTO: Ted ALJIBE / AFP) (TED ALJIBE via Getty Images)

By Michelle Jamrisko

(Bloomberg) — Consumer prices picked up at the fastest pace in three years in the Philippines and moderated only slightly in Thailand in April, complicating central bankers’ efforts to keep post-Covid recoveries on track.

The Philippines CPI reading released Thursday — a 4.9% year-on-year climb — was the hottest inflation since December 2018, capturing spillover from the Ukraine conflict with higher transportation and energy prices. In Thailand, April’s reading came in at 4.65% — slightly below Bloomberg survey estimates, while not ebbing much from a 13-year high registered last month.


A string of higher inflation readings is rattling even those policy makers who had committed to keeping interest rates low and economic growth goals at the forefront.

Philippine central bank Governor Benjamin Diokno last month told Bloomberg Television that the Philippines could be relatively patient given modest real interest rates compared with the U.S., and that a rate hike could be on the table in June. After the April CPI release, Diokno’s tone was more urgent, saying continued pressures warrant “closer monitoring to enable timely intervention in order to arrest potential second-round effects,” which will be in focus at the May meeting.

“We think risks of an earlier hike by the BSP are increasing,” while the BSP is likely still to hold off on a hike until the second half of the year, Barclays analysts led by Shreya Sodhani said after the release. Goldman Sachs economists said in a note that the April data has pushed them to project a faster tightening path, with the BSP hiking by 25 basis points in May and at every meeting thereafter through the first quarter of next year.

What Bloomberg Economics says

Philippine inflation is well above target and poised to remain so. This, plus broader lifting of public health restrictions this year, suggest a buildup of price pressures that the Bangko Sentral ng Pilipinas will need to check with higher interest rates. ... We expect the BSP to begin its rates liftoff as soon as this month, though signaling so far suggests it may wait until June.”

—Tamara Henderson, Asean economist

Bangkok’s policy makers can so far afford to be a bit more patient, seeing core inflation still within their 1%-3% target. The tourism sector, which made up about one-fifth of the economy prior to the pandemic, remains a priority and an impetus to keep interest rates low to spur demand as regional economies loosen travel restrictions.

Still, if price growth picks up again, the Bank of Thailand’s as-now distant plans to hike could be brought forward.

—With assistance from Siegfrid Alegado and Andreo Calonzo.

© 2022 Bloomberg L.P.