By means of Luisa Maria Jacinta C. Jocson, Reporter
HEADLINE INFLATION likely Yields accelerated in October amid higher prices of key commodities such as food and fuel, analysts said.
A Business world poll from 11 an.dAlysts came up with an average estimate of 2.4% for the consumer price index (CPI) in October.
The Bangko Sentral ng Pilipinas lost 2-2.8%Fforecast for the month.
“Higher prices of food products such as vegetables, fruits and FBoth the increase in prices of domestic petroleum products and the depreciation of the peso are the main sources of upward price pressure this month,” the BSP said in a statement.
If realized, inflation would have accelerated in October from 1.9% in September. However, it would still be slower than the 4.9% in the same month a year ago.
“Estimated inflation in October is 2.4% annualized. Potential causes include higher oil prices, lower electricity rates and subdued food importsFand the depreciation of the peso,” said Angelo B. Taningco, vice president of Security Bank and head of its research department.
Emilio S. Neri, Jr., chief economist of the Bank of the Philippine Islands, said adverse weather conditions likely caused a spike in the prices of food products, especially fruits and vegetables.
The agricultural damage caused by the severe tropical storm Kristine amounted to 3.76 billion euros, according to the latest bulletin from the Ministry of Agriculture.
Chinabank Research noted the possible increase in food productionFlat. “Higher prices for vegetables fruits, fish, and eggs oFfset month-on-month declines in rice and meat prices.”
“Higher fuel prices in October also contributed to the increase in prices of several food items,” said Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, Inc..
In October alone, pump price adjustments 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.
Michael L. Ricafort, chief economist of Rizal Commercial Banking Corp., also pointed to the weaker peso exchange rate, which “could lead to some increase in import costs and overallFlation.”
The peso closed at P58.10 per dollar at the end of October, falling by P2.07 from its P56.030 Fready at the end of September.
On the other hand, the central bank saidFlation would be oFoffset by lower prices for rice and meat, as well as the reduction in electricity tariffs.
Manila Electric Co. (Meralco) reduced the general rate in October by P0.3587 per kilowatt hour (kWh) to P11.4295 per kWh P11.7882 per kWh a month earlier.
For residential customers consuming 200 kWh, this translated into a decrease of about P72 in their total electricity bill for the month.
Rice prices have also fallen following the decision to reduce the tariffFfs on rice imports to 15% came into effect in July.
The latest data from the Department of Agriculture shows that the average price of well-milled rice ranged from P43 to P54 per kilogram at the end of October, lower than the price of P47 to P55 at the end of September.
Meanwhile, plain white rice cost P40-P50 per kilogram, compared to P45-P50 per kilogram a month ago.
DECREASING TREND TO CONTINUE
For the coming months, analysts said soFThe interest rate would remain within the BSP’s target range of 2-4%.
“InFInflation could still remain at 2% levels for the rest of 2024, although some seasonal increase in prices is expected towards the Christmas holidays due to increased demand, but will ultimately only ease once the holidays are over” , said Mr Ricafort.
Mr. Neri said insideFThe situation should remain “manageable” over the next twelve months, barring any shocks.
“Upside risks to this outlook include the possibility of La Niña and the spread of African swine fever,” he said.
“It should also be noted that inFInflation remains sensitive to climate conditions and could easily rise. However, stable commodity prices amid China’s economic slowdown may come under pressureFaddress these risks.”
Expectations that inflation will remain within target would allow the BSP to continue its easing cycle, Mr Ricafort said.
“For monetary policy, I think it’s on autopilot and I see very few factors that could interrupt a 25 bp cut in December,” said Patrick M. Ella, an economist at Sun Life Investment Management and Trust Corp.
BSP Governor Eli M. Remolona Jr. previously signaled a possible 25 bp cut during the Monetary Board meeting on December 19, the last of the year.
The central bank has so far cut borrowing costs by a total of 50 basis points since the easing cycle began in August.
“In addition, the next monthly inflation figures are likely to remain below 3% this quarter due to lower rice ratesFfs and base eFfects,” said Chinabank Research.
Sarah Tan, an economist at Moody’s Analytics, said despite the expected reacceleration, inflation within target “will confirm the BSP’s view that inflation expectations are well anchored.”
“While this will give the BSP the confidence to deliver another 25bp rate cut in December, a weakening peso could push them to hold rates steady.Ff the relaxation,” she added.
InsideFWith interest rates expected to remain manageable, Mr Neri said a rate cut by the BSP could be on the table in December. He cited risks that could derail the BSP’s rate-cutting cycle, including further peso weakness and uncertainty over the U.S. Federal Reserve’s own easing path.
“A stronger-than-expected US jobs report or a Republican victory in the upcoming US elections could reinforce this sentiment, potentially further weakening the peso and increasing upward pressure on inflation. The BSP could consider a pause in rate cuts if the Fed does not cut as expected,” Neri said.
“The recent volatility in the markets underlines the need for caution when it comes to rate cuts. While inflation forecasts leave room for a reduction, aggressive action may not sensible in the current climate.”
The BSP has said it will “continue to take a measured approach in ensuring price stability conducive to balanced and sustainable economic and employment growth.”