Philippine Central Bank Prepares for “Godzilla” El Niño Amid Rising Inflation
- The Bangko Sentral ng Pilipinas plans for a severe El Niño while addressing rising inflation.
- Philippine inflation rose to 7.2% in September, up from 6.1% in August, with rice prices increasing by 18%.
- The central bank anticipates further interest rate hikes to combat inflation, with a potential increase to 5.25% next week.
BANGKOK — The Bangko Sentral ng Pilipinas (BSP) is preparing for a “Godzilla” El Niño alongside a prolonged oil shock as the Philippines strives to manage inflation, which has reached a three-year high. Governor Eli Remolona indicated that the central bank is now incorporating scenarios that consider both oil prices and the potential intensity of the weather phenomenon in its policy-making.
On a panel during the IMF and World Bank annual meetings in Bangkok, Remolona explained, “We have the regular, ordinary El Niño, which is bad, and then we have the Godzilla El Niño, which is really, really bad.” He noted that the worst effects of El Niño on prices are projected to occur from November through February, reiterating that maintaining price stability is the central bank’s top priority. “We’re holding our breath,” he added, “but we have to be prepared for the worst.”
The looming risk from adverse weather conditions is exacerbating challenges for one of Southeast Asia’s most vulnerable economies. Inflation in the Philippines surged to 7.2% in September, up from 6.1% in August, with rice prices increasing by 18%, according to data from the Philippine Statistics Authority.
As the world’s largest rice importer, the Philippines faces significant food supply risks. Agriculture Secretary Francisco Tiu Laurel has warned that a new drought could further constrain domestic supply. Increased purchases by the Philippines could heighten demand in a global market already disrupted by El Niño and export restrictions. The UN Food and Agriculture Organization (FAO) has reported a continuous rise in its rice price index for six consecutive months, reaching a 20-month high.
In response to soaring inflation, the BSP raised its benchmark interest rate by 25 basis points to 5% in August. Analysts, including Aris Dacanay, senior ASEAN economist at HSBC Bank, anticipate an additional quarter-percentage-point hike next week, bringing the rate to 5.25%, followed by another increase of the same magnitude in December.
News Courtesy of CNBC
