Faster inflation seen in September — poll

By Keisha B. Ta-asan

INFLATION likely picked up in September due to higher electricity and food prices as well as the continued depreciation of the Philippine peso, analysts said.

ONE BusinessWorld a poll of 13 analysts gave a median estimate of 6.7% for September inflation, on the low end of the 6.6-7.4% forecast by the Central Bank of the Philippines (BSP).

If realized, inflation in September would be faster than the 6.3% in August and 4.2% last year. It would also mark the highest pressure in 45 months or since the pressure of 6.9% in October 2018.

Faster inflation seen in September — poll

Inflation in September will also continue to breach the central bank’s 2-4% target for the sixth consecutive month.

The Philippine Statistics Authority (PSA) is scheduled to release the latest Consumer Price Index (CPI) data on October 5 (Wednesday).

“INetcmonth is expected to (be) driven by the increase in electricity prices and prices of key food items as well as by the depreciation of the peso,” the BSP said in a statement on Friday.

Customers of Manila Electric Co. (Meralco) experienced higher electricity bills in September after the total price increased by P0.3907 per kilowatt-hour (kWh) to P9.9365 from P9.5458 per kWh in August. This is after the combined reduction of P0.9154 per kWh in the past two months.

Food prices have risen in recent weeks, reflecting the impact of Super Typhoon Karding (international name: Noru) and the weaker peso against the dollar.

“(Higher insideetcation) could be oetcset in part by the decline in local fuel prices and lower meat prices,” the BSP said, reiterating that it will continue to closely monitor developments in line with its price stability mandate.

In September alone, oil companies lowered pump prices for gasoline by P4.8 per liter, diesel by P9.95 per liter and kerosene by P9.1 per liter.

“In relation to the headline, the food basket may have contributed about 2.8%, utilities by about 1.5% and transport by 1.3%, and core (consumer price index) is also expected to have continued its upward trend.” Robert Dan J. Roces, chief economist at Security Bank Corp., said in an email.

“This means a mix of supply and demand side pressures is driving the inflation narrative as the peso’s depreciation bites into prices,” added Mr. Roces.

The peso ended trading at P58.625 per dollar on Friday, up 34.5 centavos from its P58.97 close on Thursday, data from the Bankers Association of the Philippines showed. In September alone, the peso has weakened by P2.48 or 4.4% from its August 31 close of P56.145.

“Several events could have affected inflation in September: continuous weakening of the peso against the dollar, several typhoons that have devastated our agricultural sector, especially pay farmers,” De La Salle University economist Mitzie Irene P. Conchada said in an email.

The damage caused by Typhoon Karding to the agricultural industry is now estimated at P3.1 billion, according to the National Disaster Risk Reduction and Management Council (NDRRMC).

INetcthe ration may have peaked in September, UnionBank of the Philippines, Inc. said. chief economist Ruben Carlo O. Asuncion.

“We think this could be the top of the headlineetcation and the rest of 2022 can look intoetcation print above 6% (end-2022 at 6.1%),” Mr. Asuncion said, adding that he now sees average inflation at 5.4% this year and 3.6% for 2023.

“Looking further ahead, the 4th quarter should see a more significant and sustained decline in the headlineetclargely thanks to a broad-based moderation in non-core price pressures (ie food and energy), as signaled increasingly clearly by global trends,” Pantheon Chief Emerging Asia Economist Miguel Chanco said in an email.

On the other hand, ING Bank NV Manila Senior Economist Nicholas Antonio T. Mapa said ietcthe ration has not peaked yet, which will prompt further tightening by the Philippine central bank.

“INetcDevelopments have not peaked and will remain above 7% for at least the next 3 months, prompting rate hikes of at least 100bp (basis points) from the BSP,” said Mr. Map.

The Philippine central bank on September 22 raised its benchmark policy rate by 50 bps to 4.25%. Interest rates on the demand and deposit facilities also rose by 50 bps to 3.75% and 4.75%.

The Monetary Board has raised interest rates by 225 bps so far since May.

The central bank also revised its average inflation forecast for 2022 to 5.6%. The estimate for next year had also increased to 4.1%. INetclikely to fall to 3% by 2024.

The Monetary Council will have its next political meeting on 17 November.

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