Inflation Soars to Highest in 2 Years, Here's What It Means
Inflation accelerated to 4.7% in February, the highest in two years, mainly due to a pork shortage that drove food prices higher, the Philippine Statistics Office said Friday.
Food inflation alone surged to 20.7% in February after the African Swine Fever outbreak choked pork supply, the PSA said. Prices got so high last month, government capped prices of select pork cuts in Metro Manila and shipped hogs from Mindanao to Luzon.
Why does it matter?
Inflation says by how much consumer prices increased in a month compared to the same month in the previous year. In February, that grocery basket got more expensive at a time when households are still reeling from the pandemic. Some of them lost their livelihood or cut back on work hours.
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What's the big picture?
Household budgets got tighter in February at a time when government is encouraging them to spend more to revive the economy. One year under quarantine means people are spending less outside their homes. Growth in the Philippine economy is driven in part by consumer spending, that means grocery shopping, staycations and leisure trips.
What's next?
Elevated inflation is usually a trigger for the Bangko Sentral to increase interest rate. However, Gov. Benjamin Diokno had signalled that he would keep the benchmark rate steady for now.
This is because the spike is supply-driven, ING Bank Economist Nicholas Mapa said. The ASF outbreak caused prices of pork and the over-all food basket to shoot up. It would have been a different case had the increase been demand-driven or people buying pork simply because they can and/or like it.
The 4.7% headline rate is also within the central bank's 4.3% to 5.1% forecast range and was in line with the median forecast of economists in a Bloomberg poll.
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