By Katherine K. Chan, Reporter
PHILIPPINE inflation may have quickened in September as bad weather pushed up food prices, fuel costs surged and the peso weakened, with the Bangko Sentral ng Pilipinas (BSP) expecting the rate to stay above its 3% target for a seventh straight month.
In a statement, the central bank said inflation likely settled at 6.4% to 7.4% in September from 6.1% in August and 1.7% a year earlier.
If the forecast holds, September will snap four straight months of easing prices. At the upper end of the forecast, inflation would be the fastest in three-and-a-half years. At the lower end, inflation would be the fastest in four months, matching June.
Either outcome would keep inflation above the BSP’s 3% target for a seventh straight month. The Philippine Statistics Authority is scheduled to release September inflation data on Oct. 6.
“Upward price pressures for the month are likely to be driven by weather-related increases in the prices of vegetables, fish, rice and fruits,” the central bank said on Wednesday. “Increased domestic petroleum prices and depreciation of the peso could likewise contribute to higher inflation.”
Heavy rains and flooding battered parts of the country in September as Tropical Storm Pilandok and Typhoon Queenie enhanced the southwest monsoon.
Rice prices continued to surge during the month, with the average price of local regular milled rice rising by 25% to P49.97 a kilo in the second half of September from a year earlier.
The price of well-milled rice increased by 19% year on year to P56.07 a kilo, while special rice climbed by 12.83% to P64.13 a kilo.
Motorists also faced three straight weeks of pump price increases in September before fuel retailers implemented rollbacks this week as global oil prices eased.
Department of Energy data showed diesel prices were cut by about P7.57 per liter, gasoline by P0.24 per liter and kerosene by P5.85 per liter on Tuesday.
The adjustments brought pump prices in Metro Manila and nearby areas to as much as P106 per liter for diesel, P111 for gasoline and P141 for kerosene.
The escalation of the Iran war, domestic inflation concerns and the US Federal Reserve’s monetary tightening also pushed the peso to six record lows in September.
The local currency sank to an all-time low of P62.86 a dollar on Sept. 14, weakening by 18 centavos from its previous record-low close of P62.68 on Sept. 11, based on Bankers Association of the Philippines data.
The central bank said lower meat prices and electricity rates may have partly offset these inflationary pressures.
Manila Electric Co. (Meralco) cut electricity rates for a second straight month by 4.09 centavos per kilowatt-hour (kWh) to P14.7424 per kWh in September from P14.7833 in August.
This translated to a reduction of about P8 in the monthly bill of a household consuming 200 kWh.
TIGHTENING EXTENSION
“The BSP will remain vigilant and guided by incoming data, particularly on inflation and growth prospects,” the central bank said. “It will continue to assess the impact of latest developments in the Middle East and recent weather disturbances on the country’s inflation and economic outlook.”
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said inflation staying above the BSP’s 4% upper limit could prompt the central bank to extend its tightening cycle.
Doing so would help the BSP “better manage both inflation and inflation expectations despite being largely supply-side driven and external in nature that is beyond the country’s reasonable control,” he said.
Further monetary tightening to contain inflation risks could also support long-term economic growth and development, Mr. Ricafort added.
Bank of America (BofA) Global Research said in a report on Wednesday that the Philippines is among the Southeast Asian economies most exposed to El Niño-related food price shocks due to its reliance on food imports and the large share of food in its consumer basket.
“Within ASEAN (Association of Southeast Asian Nations), the Philippines and Thailand appear most vulnerable to food price shocks given their elevated weight of food, accounting for more than 30% of their respective CPI (consumer price index) basket,” BofA analysts said.
A severe El Niño, expected to persist through the first half of 2027, could disrupt rice production, BofA said.
“While inflationary pressures remain contained for now, (the) Philippines appears particularly vulnerable to El Niño-related shocks given already elevated inflation (a part of the rise in rice inflation reflects base effects), its reliance on food imports, and the high food weight in its CPI basket,” it added.
Inflation in the food and nonalcoholic beverage index, which has the largest weight in the consumer basket at 37.75%, eased to 4.6% in August. Rice inflation, however, accelerated to a more than two-year high of 19.4%.
The Monetary Board raised its benchmark interest rate for a third straight meeting in August to contain inflationary pressures from severe El Niño, wage increases and swings in global oil prices.
It raised the policy rate by 25 basis points (bps) to an over one-year high of 5%, bringing total increases to 75 bps since the tightening cycle began in April.
BSP Governor Eli M. Remolona, Jr. has left the door open to more tightening to bring inflation closer to target.
The Monetary Board has two policy meetings left this year on Oct. 22 and Dec. 17.