December 2, 2024 | 12:00am
MANILA, Philippines — Headline inflation likely quickened for a second straight month in November, mainly due to costlier food items amid damage brought by several typhoons, analysts said.
Sarah Tan, an economist at Moody’s Analytics, said inflation may have risen to 2.5 percent in November from 2.3 percent in October due to higher food prices.
If realized, November inflation would be the highest in three months or since the 3.3 percent in August. The Philippine Statistics Authority will release inflation data on Dec. 5.
“Agricultural crops were damaged when the Philippines experienced six tropical storms from late October through November, leading to widespread flooding,” Tan said.
“Among them, destruction to rice crops was most severe as the country’s largest rice-producing regions, Cagayan Valley and Central Luzon, were heavily impacted by the rain- and landfalls.”
She also said that with domestic rice production declining, rice imports are expected to compensate for that gap. However, the lower rice tariffs will provide minimal relief against the surge in overall food inflation.
Jun Neri, senior vice president and lead economist at BPI, likewise expects inflation to hit 2.5 percent in November due to supply challenges caused by bad weather.
“Weekly data on vegetable prices appear to have been affected by typhoons as month-on-month increases rose faster than October’s,” he said.
The peso depreciation in November may have also contributed to inflationary pressures last month as a weaker peso increases the cost of imported goods and services.
Tan also said utility providers increased electricity rates in November as they passed some of the higher generation charges to consumers. Fuel prices also went up for gasoline and diesel last month.
UnionBank chief economist Ruben Carlo Asuncion likewise said November inflation may hit 2.5 percent as vegetable prices were affected by the damage caused by recent typhoons.
But he said inflation would remain within the two to four percent target of the Bangko Sentral ng Pilipinas (BSP), which may prompt the Monetary Board to cut rates by another 25 basis points at its meeting on Dec. 19.
“Nonetheless, there is also the equal probability of a hawkish pause by the Monetary Board due to the acknowledged shift of inflation outlook for 2025 through 2026 to the upside, owing specifically to potential adjustments in electricity prices and higher minimum wages,” Asuncion said.
Neri said a rate cut from the central bank is possible as inflation will likely remain manageable for the next six months. But the decision will also depend on the peso’s movements against the dollar in the coming weeks.
“The currency has been under pressure recently, reflecting market adjustments to Federal Reserve rate cut expectations driven by the anticipated inflationary impact of president Trump’s economic policies as well as Fed Chair Powell’s comments downplaying the urgency of rate cuts,” Neri said.
“The BSP may decide to maintain its rates if the Fed refrains from cutting in their December meeting or if the peso breaches the 60 level and exhibits intense volatility before their Dec. 19 policy meeting.”
The central bank delivered a 25-basis-point cut last Oct. 16, bringing the total cuts to 50 basis points since it began its easing cycle in August. This also brought the key rate to six percent.
Prior to the cuts, the BSP kept its policy rate steady for six straight meetings since November 2023. From May 2022 to October 2023, it hiked rates by 450 basis points to tame inflation.
Reinielle Matt Erece, an economist at Oikonomia Advisory & Research, Inc., forecasts that inflation will go up to 2.6 percent in November.
He also said that inflation may further increase in December amid the holiday season. A stronger dollar will also make imports more expensive, adding price pressures to the country.
“As remittances and bonuses come in, we expect consumer spending to remain elevated until December. However, we see the overall inflation of the year settling within the BSP’s targets of two to four percent. This can be their signal to continue their monetary policy easing,” Erece said.
“Although this might cause an uptick in inflation as the cost of borrowing money becomes cheaper, this will support faster economic growth,” he added.
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