By Luisa Maria Jacinta C. Jocson, Reporter
Headline inflation sharply slowed to an over-four yr low in September as food and transport costs declined, giving the Philippine central bank space for further policy easing.
The buyer price index (CPI) slowed to 1.9 % yr on yr in September from 3.3% in August and 6.1% a yr ago, the Philippine Statistics Authority (PSA) reported on Friday.
This was below the Bangko Sentral ng Pilipinas’ (BSP) 2%-2.8% forecast for the month. It was also lower than the two.5% median estimate yielded in a BusinessWorld poll of 15 analysts conducted last week.
The September print was the slowest in over 4 years (52 months) or for the reason that 1.6% print in May 2020.
In the primary nine months, headline inflation averaged 3.4%, which can also be the central bank’s full-year forecast.
Core inflation, which excludes volatile prices of food and fuel, eased to 2.4% in September from 5.9% a yr ago. Core inflation averaged 3.1% within the January-September period.
National Statistician Claire Dennis S. Mapa said slower inflation was driven mainly by the heavily weighted food and non-alcoholic beverages index, which decelerated to 1.4% in September from 3.9% a month earlier and 9.7% a yr ago.
The index accounted for a 69.1% share to the downtrend in inflation, he added.
Broken down, food inflation slowed to 1.4% from 4.2% in August and 10% within the previous yr.
Cereals and cereal products, which incorporates rice, was certainly one of the principal contributors to this slowdown, easing to 4.9% from 11.5% a month ago and 14.1% a yr prior.
Rice inflation sharply slowed to five.7% in September from 14.7% in August and 17.9% last yr. This also marked the bottom rice inflation for the reason that 4.2% print in July 2023.
Mr. Mapa said the lower rice prices were attributable to base effects and the impact from the tariff cut on rice imports.
An executive order, which slashed tariffs on rice imports to fifteen% from 35% until 2028, took effect in July.
“There are decreases month-on-month since July. We’re seeing a drop within the nominal price, but not substantial,” he added.
PSA data showed that the typical price of standard milled rice dropped to P50.47 per kilogram in September from P50.90 in July; while well milled rice declined to P55.51 per kilo from P55.85 in July. The common price of special rice decreased to P64.05 from P64.42 in July.
The vegetables, tubers, plantains, cooking bananas and pulses index also contributed to lower food inflation, because it sharply contracted by 15.8% in September from the 4.3% decline a month ago.
Meanwhile, transport inflation posted a faster annual decline at 2.4% in September from the 0.2% drop in August.
Diesel inflation contracted by 19.6% from the 8.4% decline a month prior while gasoline inflation fell to 13.8% from the 5.8% decrease in August.
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.
Mr. Mapa also noted slower inflation within the housing, water, electricity, gas and other fuels index, which eased to three.2% in September from 3.8% a month ago.
This was primarily attributable to liquefied petroleum gas prices, which eased to 10% from 17% in August.
Despite a hike in power rates in Metro Manila, electricity inflation slowed to 2.5% from 3.2% a month ago. Manila Electric Co. (Meralco) raised the general rate by P0.1543 per kilowatt-hour (kWh) to P11.7882 per kWh in September from P11.6339 per kWh within the previous month.
Meanwhile, PSA data showed the inflation rate for the underside 30% of income households slowed to 2.5% in September from 4.7% in August and 6.9% a yr prior.
Within the nine months to September, the inflation rate for the underside 30% averaged 4.6%.
Within the National Capital Region (NCR), inflation eased to 1.7% in September from 6.1% a yr earlier. Inflation in areas outside NCR averaged 2%, also much slower than 6% a yr ago.
MORE SPACE FOR POLICY EASING
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan said that inflation is predicted to further ease in the approaching months.
“The continued slowdown in inflation is predicted to spice up consumer confidence, driving higher spending and consumption and fueling business expansion,” he said in an announcement. “Moreover, easing food prices will relieve low-income households, enabling them to allocate more to other essential needs similar to education and health.”
Finance Secretary Ralph G. Recto said that full-year inflation may settle at 3.2% because the decline in rice prices becomes more pronounced in the subsequent few months.
Global rice prices are expected to go down after India’s decision to lift its export ban on non-basmati white rice.
“The relatively slower and easing trend in inflation may very well be sustained, though with slight upticks to 2% levels, barring geopolitical risks and hostile weather conditions, in view the seasonal increase in demand towards the tip of the yr in view of increased holiday-related spending,” Rizal Business Banking Corp. Chief Economist Michael L. Ricafort said in an email.
Pantheon Macroeconomics in an email note said that inflation may pick up barely in the approaching months.
“This extremely favorable drag on food — and, by extension, headline — inflation will reverse partially within the October report, sending the latter back into the BSP’s 2-to-4% goal range, albeit only a touch above the lower sure, where we expect it to stay for the foreseeable future,” Pantheon Macroeconomics said.
BSP Governor Eli M. Remolona, Jr. told Bloomberg on Thursday that inflation is predicted to settle firmly throughout the 2-4% goal band this yr.
He also said that the central bank will likely deliver rate cuts in increments of 25 basis points (bps).
The BSP chief said that there’s a likelihood for a 25-bps cut on the Monetary Board’s Oct. 16 policy review, followed by one other on its last meeting for the yr on Dec. 19.
Mr. Recto said that the most recent inflation print now gives the central bank space to further reduce policy rates.
“This provides the BSP more room to be aggressive in its monetary policy easing to assist the economy grow at a faster rate and support the federal government in increasing its revenue collections,” he said.
Pantheon likewise said that the lower-than-anticipated September print “effectively guarantees one other BSP cut this month.”
“When it comes to monetary policy, we proceed to consider that the Board will cut by an extra 25 bp at its meeting this month, before stepping up the pace of easing to 50 bp every time from December until the goal reverse repo rate falls to a terminal level of 4.00%,” it said.
Mr. Ricafort said that the BSP could possibly cut rates by 50 bps at its October meeting to match the most recent Fed cut.
