MANILA – The country’s inflation rate likely accelerated in September 2022 after a deceleration in the previous month due in part to higher food prices and power rates, according to economists.
In a report for the economic outlook for Oct. 1-7, Standard Chartered Bank economist for Asia and the Philippines Jonathan Koh projected the rate of price increases in the domestic economy posting a faster rate of 7 percent in the ninth month this year, higher than the 6.3 percent last August.
Koh said higher food and transport prices, along with the increase in electricity tariffs, were expected to push the inflation rate faster.
“Food inflation may have been boosted by a low base effect and higher fish and vegetable prices in September,” he said.
Koh said the impact of Super Typhoon Karding “also likely contributed to higher food prices amid supply-side disruptions.”
He cited the 4.1 percent month-on-month jump in electricity tariff in areas being serviced by the Manila Electric Co. (Meralco).
The increase in fuel prices also contributed to the expected rise in inflation through transport cost, he added.
Koh said the October 2022 inflation rate will further get a hit from the increase in the minimum fare in public transportation.
“Overall, with inflation rising and broadening in the Philippines, the central bank is likely to remain hawkish and continue on its hiking path,” he added.
Regina Capital Development Corporation (RCDC) head of sales Luis Limlingan projected the September 2022 inflation rate in the country accelerating to 6.8 percent.
The expected acceleration of the inflation rate can be another reason for further hikes in the Bangko Sentral ng Pilipinas’ (BSP) key rates, he said.
However, Limlingan declined to give specifics on when and by how much the BSP may likely adjust upwards again its key rates.
“(This) depends on inflation and Fed’s (Federal Reserve) next move,” he added.
Aside from the elevated inflation rate in the country, BSP officials said they need to adjust the central bank’s key policy rates to also address the weakening of the local currency, which recovered on Tuesday after hitting another record-low of 59.00 on Monday.
Limlingan said supply cut decisions of the oil exporting countries also play a major factor in inflation forecasting and its impact on the central bank’s key rate decisions.
Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort forecasts last month’s inflation rate to have risen to 6.8 percent due to lower base effects; weaker peso; impact of “Karding” on several food items like rice, corn, and vegetables; and higher electricity rates in Meralco-serviced areas.
These factors are, however, expected to be countered by the drop in the prices of local fuel prices due to the same developments overseas.
However, he said the rise of minimum fare in public transport can impact the October 2022 inflation rate.
“Inflation could still peak around October 2022 at around 7 percent and could mathematically ease thereafter,” he said.
In the first eight months this year, inflation averaged at 4.9 percent, above the central bank’s 2-4 percent target band, with the highest monthly rate so far registered last July at 6.4 percent.
With projections for further acceleration in domestic inflation rate, Ricafort said the BSP’s key rates are expected to be hiked again “as supported by generally strong economic data.”
Local monetary authorities have repeatedly said that the impact of hikes in the BSP rates on the domestic economy is expected to be cushioned by the continued recovery of the economy.
Ricafort said continued rise in the US Federal Reserve’s key rates and movements of the local currency against the US dollar will also be among the factors for the expected increases in the BSP rates in the coming months.
“For the coming months, more local policy rate hikes are still possible, if needed, as a function of any further Fed rate hikes in the quest to bring down elevated US inflation/CPI (consumer price index),” he added. (PNA)