The Philippine central bank is developing policy plans that account for an extreme El Niño weather event on top of rising oil costs, as the Southeast Asian nation grapples with inflation at its highest level in three years. Bangko Sentral ng Pilipinas Governor Eli Remolana said the central bank is now using scenarios ranging from ordinary to severe weather impacts when setting policy. He described the worst-case scenario as a "Godzilla" El Niño, adding that the most significant price effects from the weather event are expected between November and February.
Philippine inflation accelerated to 7.2% in September from 6.1% in August, according to the Philippine Statistics Authority, with rice prices jumping 18%. As the world's largest rice importer, the Philippines faces additional vulnerability to food supply disruptions. The UN Food and Agriculture Organization has raised its rice price index for six consecutive months to a 20-month high. Agriculture Secretary Francisco Tiu Laurel has cautioned that a fresh drought could reduce domestic supply, potentially driving larger Philippine purchases that would add pressure to global markets already affected by El Niño and export restrictions.
The central bank raised its benchmark interest rate by 25 basis points to 5% in August to combat runaway inflation. An economist at HSBC Bank forecasted another quarter-percentage-point increase to 5.25% the following week, with an additional same-sized hike expected in December.