Inflation for the month of November may settle at 7.8 percent, a manageable increase from 7.7 percent in October, according to a Security Bank Corp.’s (SBC) analyst.
SBC chief economist Robert Dan J. Roces said the peak, however, will come in December yet.
“Inflation pressures may continue into the peak holiday month of December, and this will remain the key consideration versus the price stability mandate of the BSP (Bangko Sentral ng Pilipinas),” said Roces.
SBC and the rest of the market are expecting the BSP’s Monetary Board will again raise the key rate by 50 basis points (bps) on Dec. 15, which was the last BSP policy meeting for the year.
“We expect the BSP to hike by 50bps in its December meeting with scope to do more in 1Q23 (first quarter 2023) until inflation cools,” said Roces on Thursday, Dec. 1.
For November, the bank expects inflation to range between 7.6 percent to a high of eight percent, with a point projection at 7.8 percent.
“Upward price pressures are expected to have come from higher electricity and LPG prices to affect the utilities basket, as well as agricultural commodities which pushed the food basket index higher on the back of typhoon Paeng. On the demand side, strong local consumption may have pushed core inflation higher. Offsetting these upward pressures are the reduction in petroleum and pork prices, the peso appreciation, and base effects,” explained Roces.
The BSP on Nov. 30 announced its November inflation projection which was 7.4 percent to 8.2 percent. The government will release the November inflation number on Dec. 6.
The BSP said inflation may not reach eight percent at all due to lower prices of petroleum products and the stronger peso vis-à-vis the US dollar which was back at the P56-level in late November.
The BSP said upward price pressures continue to come from higher electricity rates, uptick in the prices of agricultural commodities due to recent bad weather, and higher LPG prices. However the reduction in petroleum and pork prices as well as the peso appreciation will have an impact on the easing of prices.
The persistent above-target inflation is expected to continue until the first or second quarter of 2023. “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 recent BSP rate hikes, which was a cumulative 300 bps, has pushed the policy rate to five percent as of Nov. 17.
The BSP expects inflation to average at 5.8 percent for 2022 and 4.3 percent for 2023. By 2024, the BSP sees inflation slowing to 3.1 percent.
As of end-October, inflation has averaged at 5.4 percent, above the two percent to four percent government inflation target.