- Jan CPI at fresh 14-year high of 8.7%
- Faster-than-expected inflation raises odds of bigger rate hike
- Economic planning chief says inflation to moderate this year
MANILA, Feb 7 (Reuters) - Philippine annual inflation blew past expectations in January to reach a fresh 14-year high on surging food prices, raising the chance of the central bank delivering a larger interest rate hike to tame prices when it meets this month.
The consumer price index (CPI) rose 8.7% in January, the statistics agency said on Tuesday, well above the 7.7% forecast in a Reuters poll and topping the 8.1% rate in December, when the central bank had expected prices to peak.
Core inflation, which strips out volatile food and fuel items, also increased to a more than two-decade high of 7.4%, from December's 6.9%, suggesting price pressures remain broad.
President Ferdinand Marcos Jr, who also holds the post of agriculture secretary, said it was "unfortunate" inflation continued to rise, but the pace of price increases should ease with a drop in the cost of fuel and imported agricultural products.
"We have already taken some measures so that the supply will be greater and so that will bring the prices down but that will take a little time," Marcos said, echoing the predictions of his economic ministers.
Speaking after the data, Finance Secretary Benjamin Diokno said he expected inflation to start slowing in the first quarter as the government intensifies measures to boost food production.
The Philippine central bank, which had forecast January CPI to come in between 7.5%-8.3%, said on Saturday it will focus on inflation rather than the Federal Reserve's most recent 25-basis point hike when it meets on Feb. 16 to review interest rates.
Given the faster-than-expected inflation in January, Bangko Sentral ng Pilipinas (BSP) looks certain to hike interest rates by at least 25 basis points and with a bigger 50 bps likely to be on the table, ING economist Nicholas Mapa said in a Tweet.
The Philippines' broader stock index dropped 0.6% on expectations of a larger rate hike, while the peso dipped 1.1% to 55.03 per dollar, as of 0645 GMT.
The main factor behind January's red-hot inflation was the 11.2% annual rise in food inflation, the quickest pace since 2009, and compared to the previous month's 10.6%, and the 1.6% rate in the same month last year.
BSP Governor Felipe Medalla has previously signalled further rate hikes at the central bank's first two policy meetings this year to bring inflation back within a target range of 2% to 4%.
Elevated inflation, plus the need to maintain interest rate differentials between the U.S. and the Philippines, have forced the central bank to embark on aggressive tightening, with the benchmark rate rising by a total of 350 bps last year.
Reporting by Neil Jerome Morales and Enrico dela Cruz; Writing by Karen Lema Editing by Ed Davies