THE DEPARTMENT of Finance (DoF) expects inflation to peak in October amid higher utility rates and fuel prices, before easing towards year’s end.
In an economic bulletin, it said that inflation likely came in at 3.5% last month, up from 3.4% in September and 2.35% in October 2016.
This was driven mainly by higher prices of non-food items, particularly utilities.
If the estimate pans out, it would fall within the Bangko Sentral ng Pilipinas’ (BSP) 3.2-3.7% forecast range announced last week. The DoF’s estimate also matches that of BusinessWorld’s poll of 11 economists, whose median estimate was 3.5%.
The DoF said that prices for the housing, utilities and fuels subgroup likely grew by 4.1% in October, from 3.8% in September, and 0.9% in October 2016. Electricity, gas and other fuel prices were estimated to have increased by 9.2% in October from 8.2% in September and a 0.9% contraction a year earlier.
Alcoholic beverages and tobacco prices meanwhile likely rose 6.7% in October, up from 6.4% the previous month and 6.1% a year earlier.
Furnishings and household equipment on the other hand likely increased 1.9% from 1.8% the previous month and 2.4% a year earlier.
Food and non-alcoholic beverage prices however are estimated to have risen 3.5%, slowing from 3.6% in September but higher than October 2016’s 3.4%.
Manila Electric Co.’s (Meralco) rate per kilowatt hour (kwh) for a household consuming 200 kilowatts per month increased to P9.28 from P9.25 in September. Meralco’s generation charge per kwh in October increased to P4.72 from P4.54 in September.
Finance Undersecretary and chief economist Gil S. Beltran said price increases for the rest of the year will be slower due to the rice harvest, as base effects from the utilities sub-group taper off.
“Food inflation may decline further in November 2017 as the rice harvest season has started pushing down domestic rice prices,” Mr. Beltran said.
Inflation in the first nine months averaged 3.1%, below the BSP’s 3.2% full-year forecast, but within its two to 4% target band.
In its previous policy meeting, the Monetary Board maintained its benchmark interest rates, citing the manageable inflation environment and robust domestic economic growth. It has not moved on rates in three years, excluding procedural adjustments in June last year for a shift to an interest rate corridor system. — Elijah Joseph C. Tubayan
