High food, energy prices seen to push Sept inflation above 5%

The average pace of price increases in the Philippine economy will likely accelerate further this month due to stubbornly high prices of food products—aggravated by recent weather disturbances—and rising energy costs.

Thus said ING Bank Manila senior economist Nicholas Mapa who predicted that the inflation rate for September will breach 5 percent, after catching market watchers off guard with a 4.9-percent spike last month.

“Recent and approaching storm systems will undoubtedly figure into this month’s fruit and vegetable inflation numbers,” he said in a research note to the press. “Fish and meat prices will also likely remain elevated at a time that energy costs rise as crude oil has stayed close to $70 per barrel.”

He added that utility companies and retail fuel distributors have recently announced additional rounds of price increases, all adding to the supply side pressures on inflation.

Meanwhile, although the pickup in imports may be a sign of renewed demand, it also reflects an improvement in domestic production that could help increase the supply of basic goods and services, Mapa explained.

“Despite this, the price pressures appear to be accelerating at the worst possible time with base effects unfavorable in September,” the ING Bank economist added.

Amid these developments, Mapa noted that the central bank continues to face a dilemma, being “caught between a rock and hard place” as monetary authorities attempt to navigate renewed cost-push price resurgence during an economic recession.

The central bank has been very aggressive in delivering stimulus although transmission has remained soft, with commercial banks not deploying the bevy of liquidity released via monetary easing, he said. INQ