OCTOBER could have seen the second straight month of below-one percent inflation, the Bangko Sentral ng Pilipinas (BSP) said on Thursday, citing lower fuel and rice prices that could have offset increases in electricity and water rates as well as prices of select food.

“The BSP Department of Economic Research (DER) projects October 2019 inflation to settle within the 0.5-1.3% range,” the monetary authority said in an e-mail to reporters.

The Philippine Statistics Authority (PSA) is scheduled to report October inflation data on Nov. 5.

The BSP-DER estimate range compares to September’s 0.9% which was the slowest in nearly three-and-a-half years, as well as the nine-year-high 6.7% of October 2018 that was sustained from September.

The lower end of the BSP estimate matches the pace clocked in February 2016 and would be the slowest clip in nearly four years, or since November 2015’s 0.3%.

With actual headline inflation clocking in at 2.8% in the nine months to September, against the central bank’s downward-adjusted 2.5% full-year 2019 forecast, the BSP-DER October estimate would yield a 2.6-2.7% year-to-date average range.

“Increases in electricity and water rates as well as higher prices of LPG and selected food items are seen as the primary sources of upward price pressures for the month,” the BSP-DER explained in its e-mail. “Meanwhile, inflation could be tempered by lower domestic oil and rice prices.”

Customers of Metro Manila’s water concessionaires saw their basic tariffs rise by P0.02 per cubic meter for Maynilad Water Services, Inc. and by P0.17/cu.m. for Manila Water Company, Inc. starting October.

October also saw the basic rate of Manila Electric Co. — the country’s biggest electricity distributor — rise by P0.0448 per kilowatt-hour after five straight months of reduction.

At the same time, latest available PSA data show retail price of regular-milled rice falling by 18.25% to P37.53 per kilogram in the first week of October from a year ago, while that of well-milled rice similarly eased by 14.48% to P41.94/kg.

Most fuel pump prices also dropped for much of October, going down P0.25-P0.40/liter for gasoline, P0.10-P0.15/liter for diesel and P0.25/liter for kerosene effective Oct. 20-22.

Rice accounts for 9.59% of the theoretical basket of goods used by a typical household that is the basis for computing year-on-year overall price changes, while liquid fuel, solid fuel, gasoline and electricity contribute 0.13%, 1.22%, 1.28% and 4.8%, respectively.

Receding inflation since last year’s multi-year peaks has enabled the central bank to partially dial back 2018’s 175 cumulative basis point increase in benchmark interest rates by a total of 75 bps in three moves to 3.5% for overnight deposit, four percent for the reverse repurchase facility and 4.5% for overnight lending. BSP Governor Benjamin E. Diokno has said that the central bank was comfortable with that pace of easing for now.

The BSP has also cut banks reserve requirement ratio four times this year by a total of 400 basis points (bps) to 14% for universal and commercial lenders and four percent for thrift banks starting December. In the latest RRR easing last month, the reserve ratio of rural banks that will go down to three percent in November was left untouched.

“Looking ahead, the BSP will remain watchful of evolving inflationary conditions to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” the monetary authority said on Thursday. — with LWTN

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