Still-costly rice raised Feb inflation to 3.4%

INQUIRER FILE PHOTO

MANILA, Philippines. – A sustained increase in rice prices once again stoked inflation in the Philippines, with a faster-than-expected consumer price hike in February ending four consecutive months of decline and sending policymakers scrambling for measures to mitigate the impact of a strong El Niño dry spell on food supply.

Inflation, as measured by the increase in the consumer price index (CPI), quickened to 3.4 percent year-on-year in February, from 2.8 percent in the preceding month, the Philippine Statistics Authority reported on Tuesday.

The latest print surpassed the median estimate of 3.1 percent in Inquirer’s poll, but this marked the third straight month that inflation has settled within the 2 to 4 percent target range of the Bangko Sentral ng Pilipinas (BSP).

READ: Inflation breaks 4-month downtrend with 3.4% spike in Feb

National Statistician Claire Dennis Mapa said rice price inflation, which had soared to a 15-year high of 23.7 percent in February, was to blame for the flare-up amid high global prices of this commodity. This pushed up overall food and drinks inflation rate to 4.6 percent, from 3.5 percent previously.

In a statement issued by the Presidential Communications Office (PCO), Socioeconomic Planning Secretary Arsenio Balisacan said they are closely monitoring the prices of basic goods and services so they can provide the President and the Cabinet appropriate policy recommendations that would ensure stable and affordable prices of commodities.

“This (February print) remains within the government’s target range of 2 percent to 4 percent for the year,  demonstrating successful macroeconomic management,” said the National Economic and Development Authority (Neda) in the PCO statement.

READ: Pickup in Feb inflation seen, but still within target

Core inflation, on the other hand, slowed to 3.6 percent in February from 3.8 percent in the previous month.

This indicates a “stability in underlying price movements,” said the Neda.

Food inflation

Rice, a local household staple, accounts for 8.9 percent of CPI.

But Agriculture Assistant Secretary Arnel de Mesa said in a television interview, “This is not alarming because if we analyze the data, the price of rice was relatively low in the past year of 2023 …”

“We expect that this would further go down in March since the harvest season has started and this will peak in March to April and drive down the farm-gate price of palay,” he said.

Balisacan said the Marcos administration is intensifying efforts to keep inflation within target.

“The potential impact of a strong El Niño weather pattern on food prices is a significant concern for our community,” Balisacan said in a statement.

‘Stop-gap’ measures

“The economic team continues to pursue programs and measures to manage the primary contributors to inflation,” said Special Assistant to the President on Investments and Economic Affairs Frederick Go.

In the PCO statement, Go said the government is implementing measures to address factors that trigger increases in consumer prices.

The Neda said the government has introduced “stop-gap” measures to cope with the prolonged drought, such as allowing further importations of key commodities.

Meanwhile, nonfood inflation rate climbed to 2.4 percent in February, from 2 percent in the preceding month, driven by costlier housing rentals, utilities and transport.

Easing in Q1

The BSP had said inflation would ease this first quarter before overshooting the target anew in the second quarter as favorable base effects fade. Average price hike is projected to return to the target band in the third quarter to average 3.6 percent this year.

READ: BSP unlikely to cut interest rates too soon this year, says think tank

The central bank said the February reading was consistent with its forecast, adding that it’s “appropriate” to keep monetary settings unchanged in the near term.

Aris Dacanay, HSBC economist, said the above-consensus inflation “poses an upside risk of the BSP delaying the beginning of its easing cycle,” meaning borrowing costs could stay high for a longer period.

“If inflation surprises to the upside again or if risks to inflation materialize during the sensitive period of second quarter 2024, then there is a risk that the BSP will instead cut after the [US Federal Reserve rate reduction], keeping the BSP rate at 6.5 percent for a longer period than we expect,” Dacanay said.