Inflation continued downtrend in August

Prices of basic goods and services rose at their slowest pace in almost three years in August as the effects of the Duterte administration’s anti-inflation measures—especially the controversial rice tariffication law —began to take root across the economy.

According to the Philippine Statistics Authority (PSA), headline inflation rate decelerated further to 1.7 percent last month, marking the lowest consumer price index level since the 1.8 percent recorded in October 2016.

“The slowdown of inflation in August 2019 was mainly due to the slower annual increase in the index of the heavily weighted food and nonalcoholic beverages at 0.6 percent,” the PSA said in a statement, adding that the economy also saw slower annual rates last month for housing, water, electricity, gas and other fuels (1.8 percent); health (3.1 percent); recreation and culture (1.8 percent); and restaurant and miscellaneous goods and services (3.2 percent).

The transport index, which dropped by 0.2 percent, also contributed to the downtrend of inflation this month,” the agency said.

The lower August inflation raised expectations that the central bank would continue cutting interest rates over the next few months in a bid to help fuel economic growth after the first semester’s lackluster performance.

“With inflation careening below the Bangko Sentral ng Pilipinas’ own target, we expect the [central bank] governor to deliver on his pledge and cut policy rates by an additional 25 basis points at the Sept. 26 [Monetary Board] meeting,” ING Bank senior economist Nicholas Mapa said in an e-mailed note to the press.

Meanwhile, BSP Governor Benjamin Diokno said in a statement that “the latest inflation figure is consistent with the Bangko Sentral ng Pilipinas’ prevailing assessment that it will continue to decelerate in the third quarter of 2019 and pick up slightly in the fourth quarter.”

He warned, however, that deepening trade tensions between China and the United States had raised economic uncertainties and risked pushing local prices up once more.