DOF: Oct inflation could hit 2.5%

Inflation likely picked up in October as a result of higher food prices in areas affected by strong typhoons, with the Department of Finance pegging the rate at 2.5 percent, a 20-month high.

“Just like last month, the apparent surge in inflation rate is the result of base effects. October last year registered an inflation rate of 0.4 percent,” Finance Undersecretary Gil S. Beltran said in a report to Finance Secretary Carlos G. Dominguez III.

In a text message to reporters last Wednesday, Bangko Sentral ng Pilipinas Governor Amando M. Tetangco Jr. said the rate of increase in prices of basic goods likely settled within the 1.9-2.7 percent range this month.

“The effects of higher domestic oil prices during the month as well as transitory uptick in food prices in areas affected by typhoons ‘Karen’ and ‘Lawin’ could be partly offset by the slight decline in nationwide rice prices and power rates in Meralco-serviced areas,” Tetangco said. Karen and Lawin hit mostly agricultural areas in Northern Luzon.

September inflation

In September, inflation rose at its fastest pace in 18 months, as prices of food and non-food items picked up in preparation for the holiday season.

The 2.3-percent headline inflation posted last month was the highest rate since March 2015’s 2.4 percent, bringing the end-September average at 1.6 percent, below the 2-4 percent target for 2016.

As the rate was faster than August’s 1.8 percent and a year ago’s record-low of 0.4 percent, Tetangco  said September’s outturn was “consistent with our expectation that inflation will slowly inch up towards the national government target range over the policy horizon.”

The BSP slightly cut its forecast this year to 1.7 percent from 1.8 percent previously on the back of expectations of manageable inflation.

For Beltran, “the benign inflation will continue to support economic growth and steel the economy from external volatilities.”

Projections

Inflation could thus fall below the government target range for the second straight year.

A BSP poll among 25 private sector economists last month showed a mean inflation forecast of 1.8 percent for 2016, unchanged from the projection in June.

Last year, inflation averaged 1.4 percent, below the 2-4 percent government target.

Economists had cited “persistently low global oil prices, sub-par global economic growth, and stable food price conditions” as reasons for expectations of sustained below-target inflation rate this year.

“These were seen to outweigh the upside risks brought by a possible rebound in oil prices, strong domestic demand, possible power rate adjustments, a weaker peso, and the impact of La Niña in the latter part of 2016 until the first quarter of 2017,” the BSP said earlier.