HEADLINE INFLATION is expected to ease over the remainder of the year, but will come in above the central bank’s 5.8% full-year forecast, Moody’s Analytics said.
“We expect inflation to cool through the rest of the year, but the pace will be gradual and not in the large steps seen at the start of 2023,” Moody’s Analytics economist Sarah Tan said in an e-mail.
She said inflation will likely average 6% this year, higher than the 5.8% full-year forecast of the Bangko Sentral ng Pilipinas (BSP) as well as the 5.8% reading in 2022.
“The El Niño weather pattern is also expected to strengthen from year’s end until early 2024 which will disrupt domestic supply and put upward pressure on food prices,” Ms. Tan said.
“Given the large contribution of the food category to top-line inflation, we expect headline CPI (consumer price index) to remain above the BSP’s 2% to 4% target until the first half of 2024,” she added.
The BSP expects inflation to ease to 3.5% in 2024 and 3.4% in 2025. However, monetary officials have said the central bank could revise its inflation forecasts on Nov. 16.
A BusinessWorld poll of 13 analysts conducted last week yielded a median estimate of 5.7% for October inflation, well within the 5.1-5.9% forecast of the BSP.
If realized, October CPI would slow from the 6.1% posted in September and the 7.7% from a year earlier. The median would represent the lowest reading since the 5.3% in August.
However, October would still mark the 19th straight month that inflation has breached the central bank’s 2-4% target band.
The Philippine Statistics Agency will release inflation data on Nov. 7.
Ms. Tan said she expects headline inflation to ease to 5.7% as well in October.
“Food inflation should ease a touch as we entered the palay harvest season in October. That should see a stabilization in rice supply which supports the case for a softer price growth for rice compared to September,” she said.
The price of regular-milled rice ranged from P41 to P44 a kilo as of Oct. 31, while well-milled rice sold for P45-P53, the Agriculture department showed.
The price of rice has steadied after President Ferdinand R. Marcos, Jr. lifted price controls on Oct. 4.
In September, Mr. Marcos ordered prices to be capped at P41 a kilo for regular-milled rice and P45 for well-milled rice.
“However, the increase in transport fares on jeepneys, and higher electricity bills as Manila Electric Co. (Meralco) passed down the costs from higher generation charges will keep inflation hot,” Ms. Tan added.
In October, traditional and modern jeepneys increased their fares by P1 to P13 and P15, respectively.
Meralco also raised rates for typical households by P0.4201 per kilowatt-hour to P11.8198 in October.
The BSP hiked borrowing costs by 25 basis points (bps) in an off-cycle move, bringing the key rate to a fresh 16-year high of 6.5%. The BSP has raised policy rates by 450 bps since May 2022.
The BSP’s next policy-setting meeting is scheduled on Nov. 16. – Keisha B. Ta-asan