Lower food and oil prices as well as distortions from high base effects might have pulled down inflation to the 2-percent level in September, giving the Bangko Sentral ng Pilipinas (BSP) space to further slash borrowing costs.
In a statement, the BSP said consumer price increase last month likely settled between 2 and 2.8 percent.
If the projection of the central bank comes true, the figure that will be reported by the Philippine Statistics Authority on Oct. 4 will be slower than the 3.3-percent inflation recorded in August. At the same time, it means that price increases last month averaged within the 2 to 4 percent target range of the central bank.
Rallying peso
The BSP said most of the downward price pressures in September came from cheaper food items like meat, vegetables and rice, a staple grain for Filipino households. Other drivers of the softer inflation last month include lower oil prices and a rallying peso, which brings down the cost of importation of key commodities.
The central bank also explained that the drop in inflation last month might have been induced by “negative base effects” from a year ago, when the price hike was at a high of 6.1 percent.
“These are expected to offset the higher prices of fish and fruits and electricity rates,” the BSP said.
As it is, a faster decline in inflation helps create the right economic conditions for further cuts to the benchmark rate of the BSP.
An Inquirer poll of economists had pegged a September inflation reading of 2.5 percent.
The policymaking Monetary Board last August kicked off a “calibrated” easing cycle with a quarter-point reduction to the key rate, which is now at 6.25 percent.
And further easing looms as BSP Governor Eli Remolona Jr. hinted at more reductions to the policy rate at the last couple of meetings of the Monetary Board this year in October and December.
Measured approach
“Going forward, the Monetary Board will continue to take a measured approach in ensuring price stability conducive to balanced and sustainable growth of the economy and employment,” the BSP said.
In a commentary, Metrobank Research said inflation might have fallen to 2.3 percent in September “considering the slowdown in rice inflation and oil prices.”
“The forecast inflation rate, if realized, would provide a more favorable economic environment, suggesting that government efforts to manage rice prices and global oil price trends are having a positive impact,” Metrobank said.
“This also provides more space for the central bank to deliver two more 25-basis-point cuts each at the remaining Monetary Board meetings this year to help economic growth as inflation slows,” it added. INQ