Poll: August inflation seen cooling to 6.1%

MANILA, Philippines — Inflation may have eased in August but likely remained above the central bank’s target, as monsoon rains that damaged crops put pressure on food prices and offset a modest decline in transport costs.

Consumer prices may have risen 6.1 percent from a year earlier, according to the median estimate of 13 economists polled by the Inquirer.

READ: Aug inflation seen hitting as high as 6.5%

If the forecast holds, inflation would slow from 6.2 percent in July and mark its fourth consecutive month of moderation.

Price gains would also fall within the 5.5 percent to 6.5 percent forecast range of the Bangko Sentral ng Pilipinas (BSP) for August.

Overall, both the economists’ consensus and the central bank’s forecast suggest that inflation remained well above the official 3 percent target.

“Transport inflation likely eased compared to July, but it is expected to have remained elevated on an annual basis,” Dhiraj Nim, economist at ANZ Research, said. “Food inflation continued to edge higher on the back of rising rice prices.”

Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said heavy rains that soaked farms may have pushed up food prices, while stubbornly high oil prices and the peso’s weakness added to inflationary pressures. Those forces were partly offset by subdued domestic demand and the lingering effects of tight monetary policy, which have helped limit broader increases in prices, he said.

“Enhanced monsoon rains also affected logistics and distribution channels, resulting in localized supply constraints that likely pushed up food prices during the month,” Asuncion said.

“Meanwhile, renewed oil price pressures linked to Middle East uncertainties and the peso’s depreciation toward the P62-per-dollar level contributed to higher import, transport and production costs,” he added.

Rate hike

As widely expected, the BSP delivered another quarter-point rate hike at its Aug. 27 policy meeting, raising the key rate to 5 percent. The move brought the cumulative increases since the start of the tightening cycle in April to 75 basis points, with the BSP calling the latest monetary action a “preemptive” move against looming risks from a severe El Niño episode and potential wage increases.

Looking ahead, BSP Gov. Eli Remolona Jr. said policymakers were “hoping that we won’t need another rate hike,” though he noted that the central bank is nevertheless prepared to “tighten as much as we need to bring the inflation rate down to its target.”

READ: BSP raises policy rate to 5%; peso sinks to new low

The BSP now expects inflation to average 6.1 percent this year, down from its previous estimate of 6.4 percent. It sharply raised its 2027 inflation forecast, however, to 5.4 percent from 4.5 percent.

Still, some economists see signs that underlying price pressures are easing.

Domini Velasquez, chief economist at China Banking Corp., said inflation may have held at 6.2 percent in August, with lower electricity rates in areas serviced by the Manila Electric Co. and softer meat prices likely offsetting higher food and fuel costs.

“Core inflation likely eased for a second consecutive month to 4 percent from 4.2 percent in July, suggesting that underlying price pressures are gradually moderating,” Velasquez said, referring to the measure that strips out volatile food and energy prices.

Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., said policymakers may maintain their tightening bias if inflation remains persistently high. “The key challenge is to ensure that the current downtrend becomes sustainable so that purchasing power recovers without reigniting inflationary pressures,” Ravelas said. INQ