Slower inflation in store for PH

The country’s inflation rate may slow substantially for November due to moderating prices combined with what the central bank described as “negative base effects” since this month’s level is being compared to the same period last year when prices were surging.

Adding to the decelerating prices reported in the last two months, Bangko Sentral ng Pilipinas Deputy Governor Francisco Dakila Jr. said the policy-making Monetary Board last week decided to lower its forecast for the full year consumer price index.

“With the favorable outturn of inflation last September and October, we’re now revising that downward to 4.3 percent,” he said in an online briefing.The new forecast is a touch lower than the 4.4 percent that the central bank was expecting for this year, set by the Monetary Board in December 2020.

The government’s inflation target for the year stands at 2-4 percent, but this was exceeded due to supply side issues including the lingering effects of the African Swine Fever outbreak that began in 2019, as well as the increase in global crude oil prices this year.

However, Dakila said there were prospects that inflation can go back to within targets even earlier.

“It can be as early as November, barring unforseen shocks coming from oil, for example,” he said.

The central bank deputy chief said this is because of the “significant base effects” — in this case, marginal increases over already high numbers last year — affecting the inflation numbers over the next few months.

“This will serve to drive the inflation rate significantly down,” he said. “So it’s possible that inflation can return to 2-4 in November and then further decelerate.”

In addition, these same negative base effects may also push the inflation rate below the midpoint of the 2-4 percent target range during the first quarter of next year, he said.

“This would come about when there will be some moderation in global oil and non-oil prices,” Dakila explained. “Subsequently, there can be a little bit of upward movement in inflation in the second half of next year, partly due to the recovery in domestic activity, and also due to positive base effects.”

For 2022 and 2023, the official said the central bank expects the average inflation rate to return to within the 2-4 percent range.

In particular, the Monetary Board retained the baseline forecast for next year at 3.3 percent, and the 2023 rate at 3.2 percent baseline. INQ