BSP says inflation likely picked up in October

Inflation likely picked up in October 2024 from a 52-month low of 1.9 percent in September, the Bangko Sentral ng Pilipinas said Thursday.

The BSP said in a statement inflation in October settled within a range of 2 percent to 2.8 percent. The Philippine Statistics Authority will release the official figure next week.

“Higher prices of food commodities such as vegetables, fruits and fish as well as the increase in prices of domestic petroleum products and the peso depreciation are the primary sources of upward price pressures for the month,” the BSP said.

The peso recently slid on higher crude prices because of the renewed tension in the Middle East.

“These are expected to be offset in part by lower prices of rice and meat along with reduced electricity rates,” the BSP said.

The BSP’s projection is within the government’s inflation target range of 2 percent to 4 percent for 2024.

Inflation rate eased to 1.9 percent in September from 3.3 percent in August and 6.1 percent a year earlier.

“Going forward, the Monetary Board will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment,” the BSP said.

The BSP earlier said it expects a gradual relaxation of monetary policy as the inflation rate remains within the target range.

“With inflation now on a target-consistent path, we have room for a calibrated shift to a less restrictive monetary policy stance,” BSP Governor Eli Remolona said.

The BSP’s Monetary Board on Oct. 16 slashed its overnight borrowing rate by 25 basis points to 6.0 percent, following a similar rate cut in August.

Meanwhile, Bank of the Philippine Islands (BPI) expects headline inflation to hit 2.5 percent year-on-year in October on higher prices for food as a result of unfavorable weather.

BPI senior vice president and lead economist Emilio Neri Jr. said in a commentary the October inflation likely picked up after dropping to 1.9 percent in September, the lowest level in 52 months.

“Unfavorable weather conditions in October may have affected the price of some food items, especially vegetables and fruits. Oil price hikes along with peso depreciation may have also fueled the increase in food costs,” Neri said.

Despite the anticipated uptick, BPI still expects inflation to remain manageable in the next 12 months, barring new supply shocks.

Neri said possible risks include weather events like La Niña and outbreaks of African Swine Fever. Inflation could on changing climate conditions, but stable prices from China’s economic slowdown may help keep it in check, he said.

Neri said a rate cut from the BSP might happen in December if inflation stays stable.

“The recent depreciation of the peso reflects the market’s concerns over the pace of the Federal Reserve’s rate cuts and the possibility that the Fed could pause. A stronger-than-expected US jobs report or a Republican sweep in the upcoming US elections could reinforce this sentiment, potentially weakening the Peso further and adding upward pressure on inflation. The BSP may consider a pause in its rate cuts if the Fed doesn’t cut as anticipated,” Neri said.