MANILA -- (UPDATE) Inflation hurtled past forecasts to 6.4 percent in August, as food prices rose during the monsoon season and as more Filipinos wished they could work more hours, official data released Wednesday showed.

The 6.4-percent print smashed the 5.9 percent predicted by the Department of Finance and polls from Bloomberg and Reuters. Bangko Sentral ng Pilipinas Governor Nestor Espenilla said it was his "expectation" that it would not breach 6 percent.

Inflation stayed at its fastest in nearly 10 years and moved closer to 6.6 percent last recorded in March 2009. The release of inflation data was delayed by an hour, with the Philippine Statistics Authority citing technical issues.

Also on Wednesday, the PSA reported that unemployment declined to 5.4 percent in July from 5.6 percent during the same month in 2017. Underemployment rose to 17.2 percent from 16.3 percent during the same comparable period.

"If your underemployment is increasing, that tells you that a lot of our employees are looking for more work in order to augment their incomes especially in the context of rising inflation that will erode their purchasing power," said Ateneo Graduate School of Business professor Wilfrido Arcilla.

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MARKET SPOOKED

The Philippine Stock Exchange Index was down 1.64 percent to 7,751.9 at noon trading after the inflation data was released. The peso firmed up to P53.333 to the dollar from Tuesday's close of P53.535.

"The 6.4 is not good and might weaken consumer sentiment. Let's see how the BSP responds," BDO Capital president Ed Francisco told ABS-CBN News.

Investors are questioning whether the price spikes have peaked, said ATR Asset Management head of equities Julian Tarrobago.
"Doubts will continue to fuel volatility," he said.

The BSP needs to "contain runaway inflation expectations and demand pull pressures," ING bank said, adding chances of a 50-basis point hike on Sept. 27 had "zoomed."

Espenilla blamed the faster-than-expected spike on "cost-push factors" which would require "more decisive non-monetary measures to fully address."

Monetary authorities will also consider moves by the Federal Reserve, which could affect the peso, he said.

"Under the circumstances, we will weigh the need for further monetary policy action," said Espenilla, who raised the overnight borrowing rate by one full percentage point so far this year to 4 percent.

"It is most critical at this point to restore inflation back to the target range soonest and securely anchor inflationary expectations," he said.

FOOD PRICES RISING

Vegetable inflation picked up to 19.2 percent, where prices rose the fastest among all commodity groups, according to ABS-CBN Data Analytics.

Rice inflation, the biggest driver in food, accelerated to 7.1 percent, data showed.

While no typhoon hit land during the month, prolonged monsoon rains flooded large parts of Luzon.

Laban Konsyumer, an advocacy group, said it was calling for a price ceiling on rice, sugar, chicken, milkfish, canned goods, milk, bread, flour, cement and steel bars among others.

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