Inflation forecast to have hit 2.3%

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HIGHER fuel and food prices coupled with base effects could have pushed inflation up in October, analysts said.

The median forecast in a Manila Times poll of economists was 2.3 percent, higher than the September result of 1.9 percent but within the Bangko Sentral ng Pilipinas’ (BSP) 2.0- to 2.8-percent estimate for the month.

The BSP, which has a 2.0- to 4.0-percent target for the year, last month lowered its risk-adjusted forecast for 2024 to 3.1 percent from 3.3 percent.

Official October inflation data will be released by the Philippine Statistics Authority (PSA) on Nov. 5.

ANZ Research, with the lowest forecast of 2.0 percent, said that while both food and fuel prices likely picked up, the increase would have been minimal.

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“Food inflation is expected to increase but will remain subdued as rice prices fell sharply in October in international markets,” it said, adding that lower electricity prices would have softened utilities inflation.

ANZ Research said that the inflation outlook for this year remained “benign, and we expect the Bangko Sentral ng Pilipinas to cut rates by another 25 basis points to 5.75 percent at its next meeting in December.”

Emmanuel Lopez from the University of Santo Tomas Graduate School, meanwhile, said that inflation could have hit 2.2 percent last month, while Moody’s Analytics economist Sarah Tan, Sun Life Investment Management and Trust Corp. economist Patrick Ella, and Chinabank Research all expect an increase to 2.3 percent.

Tan and Ella both said that base effects would have driven inflation higher.

“The slight reacceleration is partly contributed by a lower base effect from a year earlier. Overall, October’s inflation print will see mixed price movements in the heavily-weighted food basket,” Tan said.

She added that prices likely rose faster for certain key agricultural commodities like eggs, milkfish and tomatoes, while price growth likely slowed for rice as retailers passed on lower import tariffs.

Chinabank Research, meanwhile, said that increased domestic fuel prices and upward adjustments to Metro Manila water rates likely contributed to an increase.

“However, these upward price pressures were partly tempered by reductions in electricity rates in many parts of the country,” it added.

For both Metrobank Research and Rizal Commercial Banking Corp. chief economist Michael Ricafort, inflation could have gone higher to 2.4 percent.

While food prices are expected to increase, low tariffs and the harvest season would have helped lower rice prices in Metro Manila.

“We expect annual rice inflation to be positive in October, though it should remain in the single digits due to a high base from a year ago,” Metrobank Research said.

Ricafort said that the increase would be largely due to base effects and a weaker peso.

“Inflation could still remain at the 2-percent levels for the rest of 2024, though some seasonal pick up in prices [is] expected toward the Christmas holiday season amid increased demand, but only to eventually seasonally go down upon crossing the new year after the holiday season,” he added.

Bank of the Philippine Islands senior economist Emilio Neri and Union Bank of the Philippines chief economist Ruben Carlo Asuncion had the highest forecasts of 2.5 percent.

“[The] uptick comes from slightly higher electricity charges compared to a year ago,” Asuncion said, adding that “higher fuel prices for October also contributed along with uptick of prices in various food items.”

Neri, meanwhile, said that 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,” he added.

“The price of rice fell based on PSA data as supply prospects continued to improve, although the decline has not been meaningful as legal challenges surrounding the implementation of the rice tariff cut persist.”

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