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By Katherine K. Chan
HEADLINE INFLATION might have subsided year over year in October despite high prices of certain commodities and the peso’s recent poor performance, according to the Bangko Sentral ng Pilipinas (BSP).
According to the central bank’s month-ahead projection, inflation probably landed between 1.4% and 2.2% in October, slower than the 2.3% figure recorded in the same month last year.
At the highest end of the projection, inflation likely increased from 1.7% in September, marking the quickest pace in nine months, or since the 2.9% rate in January.
At the lower end of the projection, inflation could have reached a three-month low, compared to 0.9% in July.
“The upward price pressures for the month may arise from increased prices of rice, fish, vegetables, and electricity, along with the depreciation of the peso,” the BSP stated in a release on Thursday.
The peso fell below the P59 mark on Tuesday, dropping by 23 centavos to P59.13 per US dollar from its P58.90 close on Monday. This represented a new all-time low for the peso, surpassing the former record of P59 on Dec. 19, 2024.
Data from the Department of Agriculture (DA) indicated that the average price of local regular milled rice decreased by 1.3% to P37.30 per kilo during the period of Oct. 20-25, down from P37.79 per kilo a month prior. Well-milled rice also fell by 0.9% month over month to P42.72 per kilo from P43.10, while special rice dropped by 0.3% to P56.92 per kilo from P57.10.
John Paolo R. Rivera, a senior research fellow at the Philippine Institute for Development Studies, mentioned that the BSP’s projection is founded on historical trends of rice pricing, which reflected high wholesale costs during the first half.
“While data from DA and PSA (Philippine Statistics Authority) indicate a slight decrease in rice prices in late October, the BSP likely took into account the overall price hikes that persisted for a significant portion of the month, particularly (in the first half), when retail and wholesale rice prices remained elevated due to limited domestic supply, import delays, and increased logistics expenses,” he conveyed in a Viber message.
“Therefore, rice continued to exert upward pressure on inflation compared to its historical trend, even if it weakened towards the month’s end,” he added.
Electricity rates also surged during the month as Manila Electric Co. raised the overall rate by P0.2331 per kilowatt-hour (kWh) to P13.3182 per kWh in October.
The BSP remarked that lower prices of oil, meat, and fruits could somewhat alleviate inflationary pressures for the month.
In October, adjustments in pump prices resulted in a net increase of P1.80 per liter for gasoline, P2.10 per liter for diesel, and P1.10 per liter for kerosene.
“Regarding fuels, the BSP may have noted reduced pump prices towards the end of October, which started to counterbalance earlier price increases in the month,” Mr. Rivera stated.
Mr. Rivera highlighted that pump prices rose in mid-October but later declined due to diminished demand expectations and steady output from the Organization of the Petroleum Exporting Countries.
“Thus, while fuel prices experienced a monthly net increase, the late-month downward correction helped to moderate inflation momentum heading into November,” Mr. Rivera added.
Earlier this month, the central bank indicated that its inflation expectations remain “well-anchored.”
In the nine months leading to September, headline inflation averaged 1.7%, aligning with the BSP’s annual target.
For 2026, the central bank anticipates inflation to rise to 3.1%, before decelerating to 2.8% in 2027.
The PSA is scheduled to release the October inflation statistics on Nov. 5.
“Going forward, the BSP will persist in monitoring changing domestic and international circumstances impacting the outlook for inflation and growth, consistent with its data-driven approach to monetary policy formulation,” the central bank stated.
On Oct. 9, the Monetary Board continued its easing cycle, lowering its policy rate by 25 basis points (bps) to a three-year low of 4.75%.
It has thus far reduced borrowing costs by 175 bps since commencing its easing cycle in August 2024.
BSP Governor Eli M. Remolona, Jr. has left the possibility open for further easing into next year as they aim to bolster the economy amid corruption scandals that cloud the growth outlook.
BSP Monetary Board member Benjamin E. Diokno also stated on Monday that he anticipates another 25-bp reduction to the policy rate before the year’s end and possibly more in 2026.
The Monetary Board will conduct its final policy-setting meeting this year on Dec. 11.
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