Aug inflation seen hitting as high as 6.5%
The onslaught of monsoon rains and persistently high oil prices likely kept Philippine inflation above the central bank’s target in August, reinforcing the need for policymakers to maintain a hawkish stance as they seek to rein in price hikes.
The Bangko Sentral ng Pilipinas estimated on Friday that inflation, as measured by the consumer price index, likely ranged from 5.5 percent to 6.5 percent this month.
The upper end of the range would mark an acceleration from the 6.2 percent inflation rate in July, while the lower end would suggest that price gains continued to ease for the fourth straight month.
The Philippine Statistics Authority is scheduled to release the official August figures on Sept. 4.
“Upward price pressures for the month are likely to be driven by higher rice, vegetable, fruit, and fish prices, partly due to unfavorable weather conditions, and elevated domestic fuel costs,” the BSP said.
Those pressures are expected to be partly offset by lower meat prices, electricity rates and the peso’s appreciation, the central bank said.
It added that it would remain vigilant against emerging risks and calibrate its response based on incoming data.
“It will continue to assess the impact of latest developments in the Middle East and recent weather disturbances on the country’s inflation and economic outlook,” the central bank continued.
As widely expected, the BSP delivered another quarter-point rate hike at its Aug. 27 policy meeting, raising the key rate to 5 percent.
The move brought the cumulative increases since the start of the tightening cycle in April to 75 basis points, with the BSP calling the latest monetary action a “preemptive” response to looming risks from a severe El Niño episode and potential wage increases.
Looking ahead, BSP Governor Eli Remolona Jr. said policymakers were “hoping that we won’t need another rate hike,” though he noted that the central bank is nevertheless prepared to “tighten as much as we need to bring the inflation rate down to its target.”
The BSP now expects inflation to average 6.1 percent this year—down from the prior estimate of 6.4 percent—though the 2027 outlook was sharply raised to 5.4 percent from 4.5 percent.
“We think BSP’s tone has remained decisively hawkish, in line with our expectation,” economists at Nomura Global Markets Research said. “We maintain our forecast that BSP will hike by another 25 basis points to 5.25 percent at its next monetary board meeting in October.”
For economists at Citi, the BSP may opt for a “hawkish hold” in October, before delivering another quarter-point rate hike in December.
“An October hike is possible if August and September inflation readings do surprise significantly to the upside,” they added.
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