Philippine central bank expected to raise rates again as inflation persists

The Philippine Central Bank is expected to hike interest rates today, with most economists predicting either a 25 or 50 basis point rise.

If enacted, the rate increase will be the fourth this year as bankers struggle to control inflation. At 6.4%, inflation now sits at its highest since March 2009 and is eroding the purchasing power of the peso. This has pushed up the cost of living for Filipinos—food costs alone rose 8.5% in the past year.

This risks the popularity of populist President Rodrigo Duterte, whose approval ratings have steadily decreased from a high of 90% in 2016 to just 57% by mid-2018.

Expect Mr Duterte’s political opponents to tie high food prices to his administration leading up to midterm elections in May 2019. Duterte is likely to point to high oil prices for the inflation as high fuel costs were passed on by businesses into consumer prices. While Duterte is still relatively popular for a sitting president, the midterms pose a major risk to his agenda. If the opposition wins control of Congress, it could sink his bid to ramp up massive infrastructure spending—a cornerstone of his economic development plans thus far.

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