Inflation back above 2% in October – BSP

MANILA, Philippines —  Headline inflation likely picked up to above two percent in October after easing for two straight months to 3.3 percent in August and 1.9 percent in September, the Bangko Sentral ng Pilipinas (BSP) said.

In its month-ahead inflation forecast, the central bank said inflation likely settled within a range of two to 2.8 percent in October.

“Higher prices of food commodities such as vegetables, fruits and fish as well as the increase in prices of domestic petroleum products and the peso depreciation are the primary sources of upward price pressures for the month,” the BSP said.

On the other hand, lower prices of rice and meat along with reduced electricity rates contributed to downward price pressures last month, it 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,” the BSP added.

Inflation mostly stayed within the two to four percent target range of the BSP in the first three quarters. From January to September, inflation averaged 3.4 percent.

The BSP expects inflation to average 3.1 percent this year before picking up to 3.3 percent in 2025 and 3.7 percent in 2026. All forecasts are within the central bank’s two to four percent target.

Earlier, BSP Governor Eli Remolona Jr. said there is a good chance that the Monetary Board would deliver another 25-basis-point cut in its last meeting for the year on Dec. 19. This would bring the key rate down to 5.75 percent by end-2024.

“On balance, the within-target inflation outlook and well-anchored inflation expectations continue to support the BSP’s shift toward less restrictive monetary policy,” he had said.

Remolona also said the central bank would opt for a more “measured approach” in its easing, but 100 basis points of rate cuts next year are possible.

“If we rule out a hard landing, then as I have said, we prefer to take baby steps in terms of adjusting the policy rate. Meaning, 25 basis points at a time, but not necessarily every quarter, or not necessarily every meeting,” he said.

At its meeting in October, the Monetary Board slashed borrowing costs by another 25 basis points, trimming the benchmark rate to six percent from 6.25 percent previously.

The BSP has now reduced interest rates by a total of 50 basis points, following the start of its easing cycle in August.