Inflation seen at 1.9% to 2.7% in October

MANILA, Philippines — Inflation likely settled within the 1.9 to 2.7 percent range in October from a three-month low of 2.3 percent in September, the Bangko Sentral ng Pilipinas (BSP) said.

BSP Governor Benjamin Diokno said the point inflation projection of the central bank’s Department of Economic Research is 2.3 percent for October, as higher electricity rates in Meralco-serviced areas, increases in LPG and kerosene prices, and the impact of weather disturbances on selected food items contributed to upward price pressures.

On the other hand, the BSP chief said lower prices for gasoline, diesel and rice as well as downward adjustments in water rates by Manila Water Co. Inc. and Maynilad Water Services Inc. could partly offset the upward price pressures in October.

“Looking ahead, the BSP will remain watchful of economic and financial developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” Diokno said.

Last Thursday, BSP Deputy Governor Francisco Dakila Jr. said inflation could fall below the lower end of the two to four percent target toward the end of 2020 and early 2021 as risks are still skewed toward the downside amid the impact of the global health crisis.

“We’re looking at December and January where the inflation projection may go below the low end of the target range that is below two percent,” Dakila said during the virtual press briefing on the Q3 2020 Inflation Report.

During its policy meeting last Oct. 1, the BSP’s Monetary Board lowered its inflation forecast to 2.3 percent instead of 2.6 percent for 2020 and to 2.8 percent instead of three percent for 2021.

The expected easing of inflation below the low-end of the central bank’s target, Dakila added, would be due to base effects.

“So this is something that is really very temporary. It is not something that should be a major basis for setting monetary policy,” he said.

Latest data from the Philippine Statistics Authority (PSA) showed inflation averaged 2.5 percent from January to September after easing for the third straight month to a four-month low of 2.3 percent in September.

The benign inflation environment allowed the central bank to pursue COVID-19 response measures to soften the impact of the pandemic to the economy, releasing P1.9 trillion into the financial system.

These measures include the 175-basis point cuts in interest rates bringing the benchmark interest to an all-time low of 2.25 percent, the lowering of the reserve requirement ratio for banks, the P540- billion provisional advance to the national government, the P300 billion repurchase agreement with the Bureau of the Treasury settled in September, among others.