^

Business

Inflation likely rose to over 7% in September– BSP  

Lawrence Agcaoili - The Philippine Star
Inflation likely rose to over 7% in Septemberâ BSP   
Egg vendors arranged their goods at a store in the Baguio City market on Wednesday (September 21, 2022).
STAR / Andy Zapata Jr.

MANILA, Philippines —  Inflation may have risen beyond seven percent in September amid the sharp depreciation of the peso against the dollar as well as higher food prices and the increase in electricity rates, according to the Bangko Sentral ng Pilipinas (BSP).

After slightly easing to 6.3 percent in August from 6.4 percent in July, the BSP said inflation in September likely settled within the 6.6 to 7.4 percent range.

“Inflation for the month is expected to be driven by the increase in electricity rates and prices of key food commodities, as well as by the depreciation of the peso,” the BSP said.

According to the central bank, the upside risks to inflation were partially offset by the decline in prices of local fuel and meat.

“Looking ahead, the BSP will continue to closely monitor emerging price developments to enable timely intervention to prevent the further broadening of price pressures, in accordance with the BSP’s price stability mandate,” it said.

Inflation averaged 4.9 percent between January and September, exceeding the BSP’s two to four percent target range, primarily due to the impact of the Russia-Ukraine war on global oil prices.

In its rate-setting meeting last Sept. 22, the BSP raised its inflation forecasts to 5.6 percent instead of 5.4 percent for this year and to 4.1 percent instead of four percent for next year.

To tame inflation and stabilize the peso, the central bank has so far delivered a 225-basis-point rate hike that brought the benchmark interest rate to 4.25 percent from an all-time low of two percent.

Economists are expecting more aggressive rate increases until the end of the year amid the quickening inflation as well as the weakening peso.

Amid the continued strength of the dollar, the peso hit an all-time low of 58.99 to $1 on Sept. 27. This was 15.7 percent weaker than the end-2021 level of 50.999, making the peso the second worst performing currency after the Korean won.

Christian de Guzman, senior vice president at Moody’s Investors Service, told reporters the BSP has undertaken more aggressive action in response to higher inflation.

De Guzman said the BSP is likely to follow the monetary tightening of the US Federal Reserve.

“We are likely to see the BSP basically move in lockstep with the Fed. And given our view of the Fed increasing through March, we’re likely to see the BSP continue to also increase rates through the next year,” De Guzman said.

However, he clarified that the Philippine central bank is unlikely to match the rate hikes delivered by the US Fed.

Bank of the Philippine Islands lead economist Jun Neri earlier said another rate hike by the BSP is possible next month in the wake of the next Federal Open Market Committee (FOMC) meeting in early November.

Neri expressed hope the next rate hike would not be a repeat of the low rate hike in June when “we were caught between two meetings of the FOMC with a much lower policy rate adjustment.”

“Because in June, if you remember, the BSP hike was by 25 basis points when the FOMC hike was 75,” Neri said.

According to Neri, the US is not only signaling another rate hike of 75 basis points in November, but will continue to increase until 2023.

“It’s higher, faster, longer now for the US,” Neri said, adding that indications were strong that the Fed would keep the rates high until 2024.

“We are not catching up with the higher, faster, longer signal of the FOMC. Several foreign banks have already mentioned in reports that we are seen as dovish,” Neri said.

BSP

Philstar
  • Latest
  • Trending
Latest
Are you sure you want to log out?
X
Login

Philstar.com is one of the most vibrant, opinionated, discerning communities of readers on cyberspace. With your meaningful insights, help shape the stories that can shape the country. Sign up now!

FORGOT PASSWORD?
SIGN IN
or sign in with