DOF expects 6.4% inflation in September

Published September 28, 2018, 12:00 AM

by manilabulletin_admin

By Chino S. Leyco

The rate of increase in consumer prices would likely remain elevated this month as food prices kept at higher levels, the Department of Finance (DOF) said yesterday.


Gil S. Beltran
Gil S. Beltran

Based on the latest DOF economic bulletin, Finance Undersecretary Gil S. Beltran estimated that inflation in September could settle at 6.4 percent, similar to the August figure, which was already over nine-year high.

But Beltran, who is also the DOF’s chief economist, noted that month-on-month, inflation pace slowed to 0.6 percent from 0.9 percent, signalling a moderating pace of increase in consumer prices.

Food and non-alcoholic beverages remained the biggest share to the headline inflation forecast, estimated at 3.7 percentage points.

“Price increases in food items are the main drivers of inflation. The decline in power rates, however, moderated the inflationary pressure from non-food items,” Beltan said.

Year-on-year, the largest jump was registered in tobacco at 29.6 percent, followed by operation of personal transport at 21.3 percent, vegetables at 19.4 percent, fish at 12.3 percent, non-alcoholic beverages at 11.9 percent, and rice at 10 percent.

Beltran, meanwhile, said that the recent strong monetary action by the central bank and government’s measures proposed by the Economic Development Cluster to remove non-tariff barriers on major food items will moderate food inflation in the short run.

“Policy reforms including rice tariffication and budget support for agricultural productivity programs will stem similar inflation episodes in the future,” Beltran said.

As of August, inflation averaged at 4.8 percent, above the Duterte administration’s 2.0 percent to 4.0 percent target range.

Last Thursday, the Bangko Sentral ng Pilipinas (BSP) raised its key policy rates by another 50 basis points (bps) to rein in inflation expectations and dampen exchange rate pressures.

That was the fourth time in a row that the BSP has adjusted policy rates higher. With the baseline inflation forecasts shifting up starting in the second quarter, the BSP hiked interest rate by 25 bps each on May 10 and June 20, and by 50 bps last August 9.

Ahead of the September inflation report, which will be released on October 5, the BSP revised its forecasts for this year as expected and raised it to 5.2 percent from its previous estimate of 4.9 percent.

For 2019, BSP also raised its inflation forecast to 4.3 percent from 3.7 percent while for 2020, the 3.2 percent estimate from the August 9 policy meeting is retained.

Inflation accelerated to 6.4 percent in August from 5.7 percent in July and 2.7 percent same time in 2017.