BSP sees 4.5-5.3% inflation in October

MANILA, Philippines — Inflation likely settled between 4.5 and 5.3 percent in October from 4.8 percent in September on higher electricity rates as well as oil and food prices, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin Diokno.

Aside from the upward adjustments in the pump prices of petroleum products, Diokno said other additional upward price pressures include higher rates in areas serviced by Manila Electric Co. (Meralco), increased fish and fruit prices and the weakening of the peso against the dollar.

He said the continued decline in rice and meat prices with the continued arrival of pork imports could partially offset the price pressures.

“Moving forward, the BSP will continue to closely monitor emerging price developments to help ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” he said.

Inflation averaged 4.5 percent despite easing to 4.8 percent in September from a 32-month high of 4.9 percent in August. The monthly inflation has breached the BSP’s two to four percent target since the start of the year,  settling at 4.2 percent in January.

In his closing remarks during the BSP public information campaign and 32nd National Statistics Month, Diokno said inflation is expected to decelerate to within the target range after remaining above the target until October.

“While the inflation path may remain above the target range of two to four percent up to October, it is expected to decelerate to within the inflation target range before the end of the year as the non-monetary measures of the government will help moderate the impact of supply bottlenecks,” Diokno said.

Based on the BSP assessment last Sept. 23, the Monetary Board raised its inflation forecasts to 4.4 percent from the original target of 4.1 percent for this year, to 3.3  percent in 2022 and to 3.2 percent in 2023.

Likewise, Fitch Solutions Country Risk & Industry Research also raised its inflation forecasts for the Philippines   to   4.5 percent  from the original target of four percent for this year and to 3.7 percent  for next year owing to elevated food and energy prices as well as continued supply-side issues.

“In 2021, inflationary pressures are rising in many countries globally as base effects, higher commodity prices and supply- chain challenges create localized shortages. We believe that rising inflation is a key risk to consumer spending over the remainder of 2021, as it has the potential to erode purchasing power,” Fitch Solutions said.

“Our Country Risk team now expects the BSP to normalize its monetary policy stance faster in 2022, with inflation running higher through 2021 and 2022,” Fitch Solutions said.

Diokno reiterated the BSP would remain vigilant against any emerging risk to the outlook for inflation and growth and would adjust the Monetary Board’s policy settings as needed.

“Looking ahead, the BSP will continue to support to the economy for as long as necessary to ensure the country’s strong and sustainable economic recovery,” he said.