BSP pegs October inflation at 6.2-7 percent

MANILA, Philippines — Inflation likely hit as high as 7 percent in October, the Bangko Sentral ng Pilipinas said on Wednesday, adding that soaring prices may start easing soon.

In a statement, the BSP’s economic research department said inflation in October is projected to settle within the 6.2-7 percent range. This corresponds to a month-on-month inflation forecast band of 0.2-0.6 percent.

If realized, the central bank unit’s worst case scenario estimate for October will exceed the 6.7 percent clocked in September.

According to the BSP, the projection for this month is in line with the central bank’s assessment that inflation likely peaked in the third quarter “in the absence of further price shocks.”

The BSP explained that upward price pressures from elevated local pump prices and higher water rates could be offset by lower food prices and downward adjustment in electricity rates in areas served by power distributor Manila Electric Co., the largest in the country.

“Moving forward, the BSP will continue to closely monitor evolving trends in prices and inflation expectations, and will undertake necessary measures towards its commitment to price stability,” the BSP said.

In a bid to temper consumer demand that likely lifted prices, the BSP has delivered rapid-fire interest rate hikes of 1.5 percentage points since May, its strongest action against inflation since 2000.

Monetary authorities have likewise conceded to missing their 2-4 percent target band for inflation this year and next, with rising prices seen averaging 5.2 percent in 2018 and 4.3 percent in 2019.

Analysts at First Metro Investment Corp. and University of Asia and the Pacific on Tuesday said fare hikes that will take effect in November may compel the BSP to raise policy rates by as much as 25 bps before the end of the year to stave off inflationary pressures.

The government will release the October inflation figure on November 6. — Ian Nicolas Cigaral