By Katherine K. Chan, Reporter
INFLATION may have accelerated to a four-month high in September amid fresh oil price surges, costlier food due to weather disruptions, and the peso depreciation, analysts said.
A BusinessWorld poll of 22 analysts yielded a median estimate of 6.7% for the headline inflation in September, much faster than the 6.1% in August and 1.7% a year ago.
This is within the Bangko Sentral ng Pilipinas’ (BSP) 6.4%-7.4% forecast for the month.
If realized, the September headline print would be the fastest in four months or since the 6.8% seen in May. This would also bring the country’s year-to-date inflation to 5.3%.
September would likely be the seventh straight month that inflation breached the BSP’s 3% target, and end four straight months of easing prices.
The Philippine Statistics Authority will release the September inflation report on Tuesday, Oct. 6.
“Global oil price pressures intensified in September, with domestic fuel prices reflecting substantial upward adjustments. Weather-related disruptions are also likely to have pushed food inflation higher,” Oxford Economics Assistant Economist Jun Hao Ng said in an e-mail.
In September, fuel retailers raised pump prices for three straight weeks after the reescalation of the Middle East war drove global oil prices past $100 per barrel.
Pump price adjustments during the month came in at a net increase of P14.39 per liter for gasoline, P14.48 per liter for diesel, and P12.83 per liter for kerosene.
Fuel prices in Metro Manila and nearby areas stood above P100 per liter, with diesel sold for as much as P106 a liter, gasoline at P111 a liter, and kerosene at P141 a liter.
Maybank Investment Bank Economist Azril Rosli noted that the weaker peso bumped up the cost of imported fuel and other goods in the local currency, reinforcing the already-high global oil prices.
“Beyond energy, the relatively weak peso is also contributing to higher import costs and broader price pressures,” Moody’s Analytics Associate Economist Eugene Tan also said in an e-mail.
Renewed conflict in the Middle East, coupled with domestic inflation woes and the US Federal Reserve’s tightening, dragged the peso to six new record lows in September.
The local unit tumbled to its weakest finish against the greenback at P62.86 on Sept. 14, even plunging to its worst intraday showing in history at P62.925 on Sept. 15, based on data from the Bankers Association of the Philippines.
Meanwhile, Security Bank Chief Economist Angelo B. Taningco said the headline print likely quickened in September as food inflation sizzled following the bad weather and higher rice prices “due to El Niño in rice exporting countries.”
Parts of the country suffered heavy rains and flooding last month as two tropical cyclones — Tropical Storm Pilandok and Typhoon Queenie — enhanced the southwest monsoon.
“Weather disturbances affected agricultural supply, while rice prices remained elevated,” Marites M. Tiongco, a professor at the De La Salle University Carlos L. Tiu School of Economics, said in a Viber message.
“The combination of weather-related disruptions, logistics costs and expensive fuel increases the probability that food prices accelerated again after food inflation eased to 4.6% in August,” she added.
Consumers saw even higher rice prices in September, with the average cost of local regular milled rice jumping by 24.58% to P49.97 a kilo in the second half of the month from P40.11 a year earlier. The price of well-milled rice also went up by 18.74% year on year to P56.07 a kilo from P47.22 a kilo.
According to China Banking Corp. Chief Economist Domini S. Velasquez, recent weather disruptions also drove up prices of vegetables, among other staple commodities.
“Vegetable prices rose amid unfavorable weather conditions, while flooding disrupted the delivery of agricultural products from farms to markets,” she said in an e-mail. “Prices of other food items, including rice, fish, eggs, fruits, cooking oil, and sugar, also increased during the month.”
Still, lower meat prices and electricity rates during the month offered some relief to consumers, Ms. Velasquez noted.
The Manila Electric Co. cut electricity rates for a second straight month by 4.09 centavos per kilowatt-hour (kWh) to P14.7424 per kWh from P14.7833 per kWh in August. This meant households consuming 200 kWh monthly paid about P8 less in their electricity bill for September.
STRONGER CASE FOR HIKE
Spiraling prices, especially amid looming inflation risks in the coming months, will likely warrant a fourth consecutive quarter-point hike by the BSP later this month, analysts noted.
University of Asia and the Pacific Economist Marco Antonio C. Agonia said the BSP may tighten further until December to contain the projected impact of El Niño as well as recent hikes in minimum wage and transport fares.
“In our view, BSP will likely hike by another 25 basis points (bps) to anchor inflation expectations, especially ahead of the looming Super El Niño season, lagged impact of the NCR (National Capital Region) minimum wage increase, and transport fare adjustments which will be felt more by November,” he said via e-mail. “Accelerating inflation prints moving forward may push the BSP to conduct another hike in December.”
On Sept. 26, the minimum wage in NCR was raised by P60, bringing nonagricultural workers’ daily pay to P755 and those for agricultural workers and employees of retail, service, and small manufacturing establishments to P718.
The Land Transportation Franchising and Regulatory Board approved fare hikes for all public utility vehicles starting Sept. 28.
The central bank has been in a tightening cycle since April, raising its key interest rate by a cumulative 75 bps as of August to 5%.
The BSP sees inflation likely peaking in the fourth quarter as the Super El Niño, volatile global oil prices, and minimum wage hike feed into consumer prices. It expects full-year inflation to settle at 6.1%, significantly faster than the 1.7% in 2025.
“S&P Global Market Intelligence expects the BSP to raise its policy rate by 25 bps to 5.25% at its October meeting, reflecting persistently high energy prices and potential second-round effects,” S&P Global Market Intelligence Principal Economist Harumi Taguchi also said in an e-mail.
“Rising expectations for further Fed policy rate hikes amid the ongoing US-Iran war remain a risk to the BSP’s inflation outlook,” she added.
Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp., likewise expects the Fed’s shift to tightening to prompt the BSP to keep raising its benchmark rates.
“BSP is, in our view, likely to hike 25 bps in October, if not more as the Fed starting just now to lift rates places great pressure on the BSP to act,” he said in an e-mail.
The Fed last month hiked for the first time in three years after standing pat for five straight meetings, delivering a 25-bp increase to bring its target rate to the 3.75%-4% range.
Meanwhile, Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco noted that another rate hike may be on the table for the BSP amid persistent inflation risks and sluggish economic activity.
“Nevertheless, with inflation likely to remain quite stubborn until the end of this year above 6%, I’m wary that it could bring another rate hike into the picture in the October meeting, in spite of the weakness in GDP (gross domestic product) growth,” he said via e-mail.
The Monetary Board is scheduled to hold its last two rate-setting meetings this year on Oct. 22 and Dec. 17.