Central bank sees inflation easing from October

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By Melissa Luz T. Lopez
Senior Reporter

INFLATION likely eased in October, coming from a nine-year high the preceding month, the Bangko Sentral ng Pilipinas (BSP) said on Wednesday, suggesting the possible start of a downtrend as higher oil prices were offset by lower food and electricity costs.

Prices of widely used goods likely rose 6.2-7% last month, the BSP’s Department of Economic Research said Wednesday.

This is slightly slower than the 6.3-7.1% forecast given for September which turned out as 6.7%, the fastest pace seen since February 2009.

At the same time, BSP’s estimate for last month compares to an actual 3.1% recorded in October 2017.


The Philippine Statistics Authority will report latest inflation data on Tuesday.

“Upward price pressures from domestic petroleum prices and water rates in Manila Water (Company, Inc.) and Maynilad (Water Services, Inc.)-serviced areas could be offset by the lower prices of rice and other food items as well as the downward adjustment in Meralco power rates,” the central bank said, referring to the country’s biggest electricity distributor, Manila Electric Co.

The BSP believes that inflation is slowly inching its way down.

If realized, October would break the nine-month ascent observed since the year opened.

The central bank unit sees month-on-month inflation at -0.2% to 0.6%, confirming the government’s expectations that inflation may have peaked last third quarter. BSP officials have said that inflation may have already peaked in September, and will slowly ease back to the 2-4% target range in the coming months.

Prices of widely used goods went up by five percent on average in January-September, an entire percentage point above the full-year target.

Metro Manila concessionaires Manila Water and Maynilad raised utility rates starting October following regulatory approval for rate rebasing, plus a bigger charge to cover foreign exchange differentials.

For oil, the benchmark Dubai crude saw prices climb to four-year highs earlier this month, but later on eased amid increased US stockpiles and as the peso posted some recovery against the dollar.

In an economic bulletin e-mailed on Wednesday, the Department of Finance said the 36% surge in world crude prices as well as the peso depreciation were to blame for higher oil prices last month, while the P2.50 per liter increase in excise tax had a “small impact” on the overall price increase.

Meralco also announced a reduction of P0.0966 per kilowatt-hour in electricity tariffs in customers’ October bill, owing to a lower generation charge.

The recent spike in food prices may have also been clipped following four administrative orders from Malacañang directing the National Food Authority, the Sugar Regulatory Administration and the Department of Agriculture to lift non-tariff barriers and streamline import procedures for rice, sugar, meat and fish. These measures are meant to address supply bottlenecks and, in turn, bring down food costs.

The Monetary Board has raised rates by a cumulative 150 basis points since May, including a back-to-back 50bp increase in August and September, to temper inflation expectations. BSP Deputy Governor Diwa C. Guinigundo said in an interview that another rate hike remains “on the table” for the Nov. 15 policy meeting, although policy makers will remain data-dependent in coming up with their decision.

Some Monetary Board members have signalled that they could pause the tightening cycle should the inflation momentum show signs of easing.

Still, the central bank said it will continue close monitoring of prices and will “undertake necessary measures” to ensure stability.

The BSP expects full-year inflation to clock in at 5.2% before easing to 4.3% in 2019.

State economic managers and central bank officials are banking on an impending shift from a rice import quota system to one that liberalizes importation of the staple to slash retail prices of the grain and shave 0.7 of a percentage point off inflation.