By means of Luisa Maria Jacinta C. Jocson, Reporter
HEADLINE INFLATION rose to 2.3% in October due to higher food prices, especially rice, the Philippine Statistical Authority (PSA) said on Tuesday.
Last month’s consumer price index (CPI) was faster than 1.9% in September, but slower than 4.9% a year ago.
October’s print was within the Bangko Sentral ng Pilipinas (BSP) 2%-2.8% forecast for the month, but slightly below the average estimate of 2.4% in a Business world poll among eleven analysts last week.
Overall inflation averaged 3.3% in the United States Ffirst ten months within the BSP’s 2-4% target, giving the BSP more room to continue its easing cycle.
The BSP expects inflation to average 3.1% for the entire year.
“The Monetary Board will maintain a measured approach in its easing cycle to ensure price stability conducive to sustainable economic growth and employment.” the BSP said in a statement.
Core inflation, excluding volatile food and fuel prices, remained stable at 2.4% in October. Core inflation averaged 3.1% in the January-October period.
The heavily weighted index for food and non-alcoholic beverages was the main source of faster inflation during the month, said national statistician Claire Dennis S. Mapa.
The index accelerated to 2.9% in October from 1.4% a month ago, but fell from 7% a year earlier. It also accounted for a 95.4% share of the uptrend in inFand almost half (46.9%) to the total inFcourse in October.
Grains and grain products, including rice, rose to 7.5% in October from 4.9% a month earlier, but fell from 10.8% in October 2023.
Rice in itFInflation rose from 5.7% a month ago to 9.6% in October. Staple grain contributed 30.8% or 0.7 percentage points (ppt) to inflation during the month.
Mr Mapa said base effects were pushing up rice inflation year after year. A price ceiling for rice was introduced last year.
However, he noted that despite the rise in rice inflation, the price of the key commodity has fallen month-on-month due to the recent tariff cuts on rice imports.
PSA data showed that the average price of common milled rice fell to P50.22 per kilo in October from P50.47 in September; well-milled rice decreased from P55.51 to P55.28 per kilo; and specialty rice decreased from P64.05 to P60.97 per kilo.
“The expectation is that the peak has already been reached, this is just a blip. We expect inflation and price levels per kilo to decline again in the coming months,” said Mr Mapa.
The executive order that lowered TariFfs on rice imports from 35% to 15% until 2028 cost eFfect in July.
“The slight increase in our inflation in October was mainly caused by temporary factors, such as weather disruptions such as severe Tropical Storm Kristine and Super Typhoon Leon,” said Treasury Secretary Ralph G. Recto.
The latest data from the Ministry of Agriculture shows that agricultural damage caused by severe tropical storm Kristine amounted to 6.2 billion euros, equivalent to 283,528 tonnes (MT) of volume loss.
The index for vegetables, tubers, plantains, cooking bananas and legumes saw a slower decline to 9.2% in October, compared to the 15.8% contraction in September.
“We saw prices, especially specific items, for example talong (eggplant) saw a double-digit increase. It is expected that this may be the case in November FWe will still see rising vegetable prices in the first two weeks. Normally we see that after a typhoon, but it normalizes after that,” Mr Mapa said.
Slower annual inflation was also observed for fish and other seafood (-0.4% in October, compared to -1.2% in September).
“Transportation also contributed to the upward trend, with a slower annual decline of 2.1% during the month, compared to an annual decline of 2.4% in September 2024,” the PSA said.
For October, adjustments to pump prices amounted to a net increase of P2.80 per liter for gasoline, P4.60 per liter for diesel and P3.25 per liter for kerosene.
Other major commodity groups that contributed to headline inflation but reported lower inflation rates month-on-month were the housing, water, electricity, gas and other fuels index (2.4% versus 3.3%) and restaurants and accommodation services ( 3.9%). from 4.1%).
Meanwhile, the inFInterest rates for the bottom 30% of income households accelerated from 2.5% in September to 3.4% in October, but slowed from 5.3% last year.
In the 10 months to October, inFfor the bottom 30% the average was 4.5%.
In the National Capital Region (NCR), inflation fell to 1.4% from 4.9% a year earlier. Meanwhile, inflation in areas outside NCR slowed to 2.6% from 4.9% a year ago.
CONTINUING DECREASING TREND
Meanwhile, the BSP said it expects inflation to remain within the 2-4% target in the coming quarters.
“The latest inflation figure is consistent with the BSP’s assessment that inFInflation will remain closer to the lower end of the target range in the coming quarters. This reflects easing supply pressure for key food items, especially rice,” the central bank said.
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan also said the government is on track to keep inflation within target.
“The government is fully committed to ensuring price stability and protecting Filipino households from unnecessary shocks,” he said.
Mr Recto said rice prices should continue to fall in the coming months due to the arrival of cheaper rice imports.
“In addition, the DoF (Ministry of Finance) is seeing a decline in rice prices in the international market following the lifting of India’s export ban announced in late September,” he added.
However, the central bank warned that the balance of risks to the inflation outlook for next year and 2026 has shifted upward.
“Upside risks to the inflation outlook could stem from the potential adjustments in electricity rates and higher minimum wages in areas outside Metro Manila, while downside factors still relate to the impact of lower import tariffs on rice,” the report said.
FACILITATE CYCLE
With inflation expected to remain within target in the near term, the central bank may continue its easing cycle, analysts said.
“While inflation has risen, we expect the economy to remain within the BSP target over the next twelve months, assuming no major supply shocks,” said Emilio S. Neri, Jr., chief economist of the Bank of the Philippine Islands.
“Looking ahead, adverse weather remains a significant risk to food supplies and prices, although favorable base effects, lower rice tariffs and mild price pressures in other commodity groups should help keep overall inflation firmly within target,” Chinabank Research said in a report. report.
At its December 19 meeting, the Monetary Board said there is room to further reduce borrowing costs.
“We continue to see the possibility of a BSP rate cut in December given the favorable outlook for inflation. However, external developments could also influence the BSP’s decision,” said Mr Neri.
He cited risks to this outlook, including the depreciation of the peso, the US Federal Reserve’s own interest rate cutting cycle and the US presidential election.
Since August, the Monetary Board has cut interest rates by 50 basis points (bps) this year, bringing the policy rate to 6%.
BSP Governor Eli M. Remolona Jr. announced a possible 25 bp interest rate cut in December. This could bring the benchmark to 5.75% by the end of 2024.