BSP sees inflation slowing down in November

The country’s problematic inflation rate may have finally reached an inflection point this month with the central bank expecting a slowdown in the pace of increases in the prices of basic goods and commodities.

In a statement, the economists of the Bangko Sentral ng Pilipinas said that the increase in the consumer price index for the month of November would likely settle within the 5.8-6.6 percent range after being on a steady uptrend for most of 2018.

“The deceleration of inflation for the month could be attributed to the sharp decline in petroleum prices, the normalization of supply conditions in rice and other agricultural commodities and the peso appreciation,” the central bank economists said.

The latest official inflation rate from the government stood at 6.6 percent in October, unchanged from the previous month’s level—a development viewed by some observers as the beginning of a reversal that will restore the pace of consumer price hikes to normalcy by next year.

The BSP economists warned, however, that some factors could still conspire to keep inflation elevated over the near term.

The recent downtrend in the prices of rice and crude oil, they said, “could be offset in part by the adjustments in jeepney and bus fares as well as higher electricity rates” in areas serviced by Manila Electric Co., the country’s largest power distributor.

On top of this, some hawkish members of the central bank’s policymaking Monetary Board are also worried about the impact that wage increases recently approved for the labor sector would have on the inflation picture, as well as the increased consumer spending that normally happens toward the period preceding national elections—in this case, the May 2019 polls—where billions of pesos are spent by candidates campaigning for national and local office.

As such, the BSP said it would “remain watchful of economic and financial developments to ensure the achievement of its primary mandate of price stability conducive to balanced and sustainable economic growth.”

The Monetary Board is set to convene on Dec. 13 for its final interest rate-setting meeting of the year, having raised interest rates by a total of 175 basis points over all their meetings since May. This monetary policy tightening streak marked the central bank’s most aggressive string of interest rate hikes since the economic crisis of 2000 in the waning months of the Estrada administration.