By Luisa Maria Jacinta C. Jocson, Reporter
HEADLINE INFLATION picked up to 2.3% in October amid higher food prices, particularly rice, the Philippine Statistics Authority (PSA) reported on Tuesday.
Last month’s consumer price index (CPI) was faster than 1.9% in September but slower than 4.9% a year ago.
The October print was within the Bangko Sentral ng Pilipinas’ (BSP) 2%-2.8% forecast for the month but slightly below the 2.4% median estimate in a BusinessWorld poll of 11 analysts last week.
Headline inflation averaged 3.3% in the first 10 months, within the BSP’s 2-4% target, giving the BSP more room to continue its easing cycle.
The BSP expects inflation to average 3.1% for the full year.
“The Monetary Board will maintain a measured approach in its easing cycle to ensure price stability conducive to sustainable economic growth and employment,” the BSP said in a statement.
Core inflation, which excludes volatile prices of food and fuel, was steady at 2.4% in October. Core inflation averaged 3.1% in the January-October period.
The heavily weighted food and nonalcoholic beverages index was the main source of faster inflation during the month, National Statistician Claire Dennis S. Mapa said.
The index accelerated to 2.9% in October from 1.4% a month ago but eased from 7% a year earlier. It also accounted for a 95.4% share in the uptrend in inflation and nearly half (46.9%) to the overall inflation rate in October.
Cereals and cereal products, which include rice, spiked to 7.5% in October from 4.9% a month prior but eased from 10.8% in October 2023.
Rice inflation jumped to 9.6% in October from 5.7% a month ago. The staple grain contributed 30.8% or 0.7 percentage point (ppt) to inflation during the month.
Mr. Mapa said base effects drove up rice inflation year on year. A price ceiling on rice was implemented last year.
However, he noted that despite the pickup in rice inflation, the price of the key commodity has been declining on a month-on-month basis amid the recent tariff cut on rice imports.
PSA data showed that the average price of regular milled rice dropped to P50.22 per kilo in October from P50.47 in September; well-milled rice declined to P55.28 per kilo from P55.51; and special rice decreased to P60.97 per kilo from P64.05.
“The expectation is that it peaked already, this is just a blip. We expect that it will go down again, the inflation rate and price level per kilo in the coming months,” Mr. Mapa said.
The executive order that slashed tariffs on rice imports to 15% from 35% until 2028 took effect in July.
“The slight uptick in our October inflation rate was mainly caused by temporary factors, such as weather disturbances like Severe Tropical Storm Kristine and Super Typhoon Leon,” Finance Secretary Ralph G. Recto said.
Latest data from the Agriculture department showed that agricultural damage due to Severe Tropical Storm Kristine stood at P6.2 billion, equivalent to 283,528 metric tons (MT) of volume loss.
The vegetables, tubers, plantains, cooking bananas and pulses index saw a slower decline to 9.2% in October from the 15.8% contraction in September.
“We saw prices, especially specific items, for example, talong (eggplant) had a double-digit increase. The expectation is that this November, maybe the first two weeks, we will still see rising vegetable prices. Normally we see that after a typhoon, but that normalizes after,” Mr. Mapa said.
Slower annual inflation was also seen for fish and other seafood (-0.4% in October from -1.2% in September).
“Also contributing to the uptrend was transport with a slower year-on-year decrease of 2.1% during the month from a 2.4% annual drop in September 2024,” the PSA said.
For October, pump price adjustments stood at a net increase of P2.80 per liter for gasoline, P4.60 per liter for diesel, and P3.25 per liter for kerosene.
Other major commodity groups that contributed to overall inflation but posted lower inflation rates on a month-on-month basis were the housing, water, electricity, gas and other fuels index (2.4% from 3.3%) and restaurants and accommodation services (3.9% from 4.1%).
Meanwhile, the inflation for the bottom 30% of income households quickened to 3.4% in October from 2.5% in September but slowed from 5.3% last year.
In the 10 months to October, inflation for the bottom 30% averaged 4.5%.
In the National Capital Region (NCR), inflation eased to 1.4% from 4.9% a year earlier. Meanwhile, inflation in areas outside NCR slowed to 2.6% from 4.9% a year ago.
FURTHER DOWNTRENDMeanwhile, the BSP said it expects inflation to remain within the 2-4% target in the coming quarters.
“The latest inflation outturn is consistent with the BSP’s assessment that inflation will continue to trend closer to the low end of the target range over the succeeding quarters. This reflects easing supply pressures for key food items, particularly rice,” the central bank said.
National Economic and Development Authority (NEDA) Secretary Arsenio M. Balisacan likewise said the government is on track to keeping inflation within target.
“The government is fully committed to ensuring price stability and protecting Filipino households from undue shocks,” he said.
Mr. Recto said rice prices should continue to ease further in the coming months amid the entry of cheaper rice imports.
“Moreover, the DoF (Department of Finance) is seeing a decline in rice prices in the international market, following the lifting of the export ban of India announced in late September,” he added.
However, the central bank warned that the balance of risks to the inflation outlook has shifted to the upside for next year and 2026.
“Upside risks to the inflation outlook could emanate from the potential adjustments in electricity rates and higher minimum wages in areas outside Metro Manila, while downside factors continue to be linked to the impact of lower import tariffs on rice,” it said.
EASING CYCLEWith inflation expected to remain within target in the near term, the central bank can continue on its easing cycle, analysts said.
“While inflation has gone up, we expect it to remain within the target of the BSP in the next 12 months, assuming no major supply shocks,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said.
“Looking ahead, adverse weather continues to pose a significant risk to food supply and prices, though favorable base effects, lower rice tariffs, and benign price pressures in other commodity groups should help keep overall inflation firmly within target,” Chinabank Research said in a report.
It said the Monetary Board has room to continue reducing borrowing costs at its Dec. 19 meeting.
“We continue to see the possibility of a BSP rate cut in December given the favorable outlook for inflation. However, external developments may also affect the BSP’s decision,” Mr. Neri said.
He cited risks to this outlook, such as the peso depreciation, the US Federal Reserve’s own rate-cutting cycle, and the US presidential elections.
Since August, the Monetary Board has lowered interest rates by 50 basis points (bps) this year, bringing the key rate to 6%.
BSP Governor Eli M. Remolona, Jr. has signaled a possible 25-bp rate cut in December. This could bring the benchmark to 5.75% by end-2024.