Philippines’ central bank braces for ‘Godzilla’ El Niño - Financial Times

The Philippines' central bank is preparing for the economic effects of a strong El Niño weather pattern, which the Financial Times reports has been described as "Godzilla" in scale. El Niño typically brings below-average rainfall to parts of Southeast Asia, and the Philippines is particularly exposed given the weight of agriculture in its economy and the share of household budgets spent on food.

For markets, the key channel is inflation. Drought conditions can reduce harvests of staples such as rice, pushing food prices higher and complicating the central bank's task of keeping price growth within its target. That, in turn, feeds into expectations for interest rate policy and the peso, since a central bank facing renewed price pressure may have less room to ease.

What to watch: the severity and duration of the dry spell, rice output and import decisions, and the central bank's own commentary on the balance between inflation risks and growth. Food supply shocks of this kind tend to fade once weather conditions normalise, but the timing is uncertain.