MANILA, Philippines — There was a good chance that inflation breached the midpoint of the central bank’s target band this month.
Consumer prices likely ticked up between 2.4-3.2% in November, the Bangko Sentral ng Pilipinas (BSP) said on Friday.
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That was a forecast highly tilting to the likelihood of a faster reading than last month’s 2.5%. On top of that, the upper limit of that band, if realized, would be the first time in 17 months that inflation moved closer to the high-end of the annual 2-4% target.
Official inflation data for November will be released on December 4.
In a Viber message to reporters, BSP Governor Benjamin Diokno pinned the blame on higher domestic oil prices that came with the economic reopening and the return of vehicles, including public transport on the road. Energy department data showed diesel prices rising for three of the past four weeks, while gasoline costs went up for 2 straight weeks.
More than petroleum costs however, Diokno said “the impact of weather disturbances on the prices of rice and other agricultural products” highly contributed to inflation this month after five typhoons from October to November ravaged farmlands.
A price uptick was already expected even by state statisticians who last month told reporters the impact of natural calamities on prices of basic goods and services tends to be delayed. The last typhoon to hit land, Typhoon Ulysses, left P4.72 billion in crop damage as of November 27, potentially tightening food supplies and thus, pushing up prices.
Price controls had since been in effect in Luzon after President Rodrigo Duterte placed the island under state of calamity, but the declaration was not made until November 18 when inflation readings would have already been collected by statisticians.
On the flip side, Diokno said lower electricity rates for customers of Manila Electric Co., the country’s largest power distributor, would have partially offset price increases elsewhere. A strong peso, which has appreciated 5.02% as of Friday, would have likewise tempered consumer costs as imports got cheaper.
Despite the probability of inflation accelerating in November, inflation is far from causing a headache to policymakers this year, partly because of bad reasons that the coronavirus pandemic has softened demand from consumers who would rather stay at home than eat out.
From January to October, inflation averaged 2.5% year-on-year, well within the central bank’s target for the year. Subdued prices, in turn, have given BSP opportunity to lower interest rates and encourage banks to lend more, albeit unsuccessfully, without the risk of prices getting out of hand when more funds flow through the financial system.
“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.