The Bangko Sentral ng Pilipinas (BSP) said the inflation rate for October may hit as high as 7.9 percent or a low of 7.1 percent due to higher prices of oil and agricultural products, transport fare and a depreciated peso.
The low end of the 7.1 percent to 7.9 percent forecast range is still higher compared to September’s actual rate of 6.9 percent.
The BSP said on Monday, Oct. 31, that inflation pressures will come from transport fare hikes, elevated domestic petroleum prices, higher agricultural commodity prices due to recent typhoons, and a peso-US dollar exchange rate that fell to P59 in October.
But, the BSP said this could be offset in part by the reduction in electricity rates for Manila Electric Co.-serviced areas, lower LPG prices, and reduction in prices of fish.
“More importantly, inflation is projected to gradually decelerate in the succeeding months as the cost-push shocks to inflation due to weather disturbances and transport fare adjustments dissipate,” said the BSP.
The Philippine Statistics Authority will announce the October inflation rate on Nov. 4.
Inflation rose to 6.9 percent last September from 6.3 percent in August. Year-to-date, inflation averaged at 5.1 percent, exceeding the government’s two percent to four percent target for 2022, 2023 and 2024.
The BSP expects inflation will stay above-the-target in the near term amid broadening price pressures and second-round effects.
“The BSP remains committed to bringing inflation back to the government target and continues to emphasize the importance of urgent non-monetary government interventions to ease domestic supply constraints. Looking ahead, the BSP remains vigilant in monitoring all risks to the inflation outlook and is prepared to take necessary actions to safeguard price stability,” said the BSP.
BSP Governor Felipe M. Medalla has said that exchange rate intervention and raising BSP policy rates are two primary monetary policy measures that they are undertaking to stabilize the peso-US dollar rates and bring back inflation to within the target range by 2024.
Medalla has announced previously that the BSP rate should be at least 100 basis points (bps) higher than the US interest rates. As of Sept. 22, after raising the key rate by 225 bps since May, the BSP benchmark rate is currently at 4.25 percent versus the US Federal Reserve’s three percent to 3.25 percent.
Medalla also said they intend to mirror future US Fed rate hikes. The next BSP monetary policy meeting is on Nov. 17. The US Fed is expected to increase rates by another 75 bps on Nov. 2 to tame its own runaway inflation.
Medalla said the current BSP policy stance is still accommodative and supportive of a sustained economic growth.
The BSP’s average inflation forecast for this year is 5.6 percent and 4.1 percent for 2023. Both years have inflation projections that are above the two-four percent target range. Update