Standard Chartered proposes own calculation of core inflation to analyze Philippine economy

Instead of the central bank's narrower measure.

Standard Chartered has recommended watching its own calculation of core inflation – which excludes food and energy – along with the Philippine central bank’s narrower measure.

According to a research note from Standard Chartered, its measure strips out all food and energy prices, and has been more stable than the narrower local definition of core inflation.

Standard Chartered said it uses its measure as a tool to analyse potential changes in the central bank’s policy stance, as it thinks it better reflects underlying domestic inflation given the volatile and exogenous nature of food and energy prices.

Here's more from Standard Chartered:

The central bank differentiates between temporary and long-term price changes in its policy deliberations. The Philippines uses a unique core inflation measure that excludes the following components: rice, corn, some meat, some fruits, some vegetables, natural gas, and gasoil for motor vehicles.

These items account for 20% of the CPI basket. The following food and energy items are included in the central bank’s ‘core’ inflation measure: fish; other meat, fruit and vegetables; other food items (such as sugar); electricity; solid fuels; and fuels excluding gasoil.

All food and energy items account for 32.5% of the CPI. The Philippines’ broader ‘core’ inflation measure has deviated significantly from the narrower measure excluding all food and energy prices in recent years .

We think the fully adjusted measure is a more accurate gauge of how sticky the current low-inflation trend is. In recent months, core inflation based on our definition has been more resilient than the central bank’s definition. This may have been an input to the central bank’s decision not to cut policy rates.