Nov inflation likely sped up to 2.5%–poll
Inflation might have slightly picked up in November, no thanks to the supply problems caused by the recent typhoons and the pass-through effect of a weak peso.
An Inquirer poll of eight economists yielded an average forecast of 2.5 percent for November which, if realized, would be slightly faster than the 2.3 percent recorded in October.
But despite the potential increase, all analysts shared the same view that inflation last month would stay within the 2 to 4 percent target range of the Bangko Sentral ng Pilipinas (BSP). The BSP had estimated the November print to settle between 2.2 percent and 3 percent.
Emilio Neri Jr., lead economist at Bank of the Philippine Islands, said the faster November inflation would be driven in part by “supply challenges caused by bad weather.” Recall that six powerful storms hit the country from the end of October to mid-November, destroying billions of peso in agriculture output.
Currency woes
Neri added that the “nonnegligible” weakness of the peso may have also added to price pressures. The local currency had revisited the record-low 59:$1 level twice in November as the aftermath of the US presidential elections emboldened the dollar bulls.
“Inflation will likely remain manageable in the next six months, supported by the slower increase in rice prices and stable commodity prices amid the economic slowdown in major economies like China,” Neri said.
“However, we also see risks that could push inflation higher, such as weather disturbances and potential for further depreciation of the peso,” he added.
Ella Oplas, economist at De La Salle University in Manila, said demand-side price pressures might show in the November print as workers start receiving their annual 13th month pay, giving them additional purchasing power in time for the Christmas shopping season.
“There is heightened demand brought about by the holiday season rush. The increase is more visible during the third week of the month, when people receive their 13th month pay,” Oplas, who penciled in a 3-percent inflation for November, said in an interview.
Cut or pause?
A within-target inflation would give the BSP enough room to further cut interest rates in a bid to support economic growth. The Philippine Statistics Authority will release the November inflation data on Dec. 5.
BSP Governor Eli Remolona Jr. had said the central bank would stay in its “measured” easing cycle, although he floated the possibility of a rate cut pause in December amid “persistent” price pressures.
So far this year, the BSP has cut the policy rate by a total of 50 basis points (bps) to 6 percent, with more reductions cumulatively worth 100 bps seen possible in 2025.
Ruben Carlo Asuncion, chief economist at Union Bank of the Philippines, believes that both a quarter-point cut and a “hawkish pause” are possible at the policymaking Monetary Board (MB) meeting on Dec. 19.
“With 2024 average inflation at near mid-target, the likelihood of another cut is high because of price pressures being still manageable,” Asuncion said.
“Nonetheless, there is also the equal probability of a hawkish pause by the MB 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,” he added.
