September inflation likely hit 3-year high, says BSP
Inflation may have accelerated again in September, possibly reaching its fastest pace in more than three years, amid a troublesome mix of weather-related food price pressures and higher oil prices, the Bangko Sentral ng Pilipinas (BSP) said.
In a statement on Wednesday, the BSP estimated that consumer prices had risen between 6.4 percent and 7.4 percent in September from a year earlier. If the forecast holds, it would mark a sharp acceleration from the 6.1-percent increase recorded in August.
At the upper end of the central bank’s forecast, inflation would reach its highest level since March 2023, when consumer prices rose 7.6 percent. That would also put inflation further above the central bank’s 3-percent target.
The government will report the September inflation data on Oct. 6.
The BSP attributed the expected flare-up to higher food prices after enhanced monsoon rains had battered farms, driving up the prices of vegetables, fish, rice and fruits.
The government said the combined effects of the rains and Tropical Cyclones “Luis,” “Maymay,” “Neneng” and “Pilandok” had damaged P4.38 billion worth of agricultural produce nationwide.
Oil, peso woes
The central bank also cited higher domestic petroleum prices and peso depreciation as sources of price pressure. Local oil companies raised pump prices three times in September amid a prolonged war in the Middle East, according to energy department data, while the peso weakened toward 63 per dollar before recovering some of its losses.
“These pressures could be partially offset by lower prices of meat and electricity rates,” the BSP said.
In August, the BSP delivered its third quarter-point rate increase of the current tightening cycle, bringing its benchmark rate to 5 percent. The central bank said the move was intended to “preempt” emerging risks from a severe El Niño episode and looming wage increases.
That leaves policymakers facing a difficult balancing act: containing inflation without further weakening an economy that grew just 2.6 percent in the first half of the year.
In a research note, economists at Capital Economics in London said the BSP may deliver at least one more interest rate hike under the current cycle. They said economic growth would be restrained at just 3 percent this year even when the war-driven energy shock fades, as weak business confidence tied to a major corruption scandal lingers.
As inflation eases in 2027, Capital Economics expects the BSP to shift its focus toward supporting the weak economy through interest rate cuts.
“And while the government is moving to restart stalled infrastructure projects, fiscal policy is likely to be tightened in order to curb the rising debt-to-GDP (gross domestic product) ratio,” the firm said. “Meanwhile, El Niño threatens to harm agricultural output and poses an upside risk to the inflation outlook.”
Separately, economists at the University of Asia and the Pacific said stable remittances, improving business and consumer sentiment, as well as seasonal holiday spending could provide a modest lift to economic growth in the fourth quarter.
But they cautioned that higher minimum wages and a potentially aggressive El Niño season could add to inflationary pressures.
“The Philippine market outlook presents a balanced environment for the fourth quarter,” they said.
******
Get real-time news updates: inqnews.net/inqviber
