MANILA, Philippines — Inflation likely settled within the two to 2.8 percent range in September after falling to 3.3 percent in August from 4.4 percent in July, according to the Bangko Sentral ng Pilipinas (BSP).
“Negative base effects along with lower prices of food commodities including rice, meat and vegetables as well as lower domestic oil prices, and the appreciation of the peso are the primary sources of downward price pressures for the month,” the BSP said.
These factors would offset higher prices of fish and fruits as well as elevated electricity rates, the central bank said.
“Going forward, the Monetary Board will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment,” it added.
Inflation averaged 3.6 percent from January to August, well within the BSP’s two to four percent target for the year.
After gradually rising for six straight months from an over three-year low of 2.8 percent in January, inflation fell in August amid lower food prices.
Sarah Tan, an economist from Moody’s Analytics, said favorable base effects could drag inflation down to 2.5 percent in September.
“Price pressures will ease on rice, which makes up a significant proportion in the heavily weighted food basket,” Tan said.
“Prices for the staple soared in 2023 when India banned the export of non-basmati white rice. The cut in the tariff on imported rice, which took effect at the end of June and will last until year’s end, will help bring down inflation for this staple,” she said.
On the other hand, electricity rate hikes may put upward pressure on inflation for utilities, she added.
Due to the inflation outturn in August and downside risks, the BSP’s Monetary Board decided to cut borrowing costs by 25 basis points, the first time in nearly four years. This brought the key rate down to 6.25 percent from 6.5 percent previously.
The BSP raised rates by 450 basis points from May 2022 to October 2023 to tame inflation. The BSP maintained a hawkish pause as it kept rates steady for six straight meetings prior to the cut in August.
BSP Governor Eli Remolona Jr. earlier signaled that the Monetary Board has scope to cut interest rates further in the fourth quarter.
The central bank will meet on Oct. 16 and Dec. 19 to discuss policy.