Inflation likely below 3% in Sept. — BSP

By Luisa Maria Jacinta C. Jocson, Reporter

INFLATION likely eased below 3% in September, the Bangko Sentral ng Pilipinas (BSP) said, as food and fuel costs declined.

The central bank’s month-ahead forecast showed that inflation likely settled throughout the 2-2.8% range.

This is able to be slower than 3.3% in August and 6.1% a 12 months ago.

A BusinessWorld poll of 15 analysts conducted last week yielded a median estimate of two.5% for the September consumer price index (CPI). This is able to even be the slowest print in nearly 4 years or since 2.3% in October 2020.

“Negative base effects together with lower prices of food commodities including rice, meat and vegetables, in addition to lower domestic oil prices, and the appreciation of the peso are the first sources of downward price pressures for the month,” the BSP said in a press release.

The Philippine Statistics Authority (PSA) will release September inflation data on Friday (Oct. 4).

“Recent available data from the Department of Agriculture and PSA indicate a decline in rice prices from last month, especially with the continual implementation of the reduction in tariffs on imported rice and the decline in global rice prices,” Metropolitan Bank & Trust Co. (Metrobank) said in a report.

An executive order, which slashed tariffs on rice imports to fifteen% from 35% until 2028, took effect in July.

In August, rice inflation eased to 14.7% from 20.9% in July. Rice typically accounts for nearly half of overall inflation.

Metrobank expects rice inflation hitting single-digit levels, possibly at around 6%, amid high base effects.

De La Salle University economist Mitzie Irene P. Conchada said the decline in fuel prices would also bring down the costs of other key commodities.

“Inflation for September is anticipated to decelerate on account of lower fuel prices. For this reason, food and other basic commodity prices have stayed the identical or lower,” she said in an e-mail.

In September, pump price adjustments stood at a net decrease of P0.95 a liter for gasoline, P2.10 for diesel and P2.35 for kerosene.

The peso appreciated by 8.1 centavos to P56.03 a dollar at end-September from its P56.111 finish at end-August.

The central bank said lower food and fuel prices likely offset the upper prices of fish, fruits and electricity.

“Fish prices this month went up on account of supply disruptions brought on by inclement weather,” Metrobank said.

“Inclement weather caused by the southwest monsoon disrupted the availability of agricultural commodities, driving select vegetable prices up. With lowland vegetables like ampalaya, eggplants and carrots essentially the most affected, prices of some highland vegetables also increased,” it added.

For September, Manila Electric Co. (Meralco) raised the general rate by P0.1543 per kilowatt-hour (kWh) to P11.7882 per kWh from P11.6339 per kWh within the previous month.

Meanwhile, the BSP said the Monetary Board “will proceed to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment.”

The improving inflation path would give the BSP room to proceed its policy reductions, Metrobank said.

“This also provides extra space for the central bank to deliver two more 25-basis-point (bp) cuts each on the remaining Monetary Board meetings this 12 months to assist economic growth as inflation slows,” it said.

The Monetary Board’s next meeting was rescheduled to Oct. 16 from Oct. 17. Its final meeting for the 12 months is about for Dec. 19.

BSP Governor Eli M. Remolona, Jr. on Monday said there’s scope to chop rates of interest by 50 bps in a single meeting, but this might only be done in a “hard-landing” scenario.

If there isn’t a risk of a tough landing, he noted the likelihood of delivering 25-bp rate cuts during each of the 2 remaining meetings.

In August, the central bank reduced borrowing costs for the primary time in nearly 4 years, cutting its policy rate by 25 bps to six.25% from the over 17-year high of 6.5%.