Inflation seen inching up in Oct.; typhoons wreak havoc on prices

The Bangko Sentral ng Pilipinas expects the increase in consumer prices to accelerate in October, partly due to the adverse effects of recent typhoons on food supply.

October inflation may average between 4.5 and 5.4 percent, the BSP said, adding that prices could temper the following month.

Should the inflation forecast for October materialize, the average for the first 10 months of the year will hover between 4.3 and 4.4 percent, still within the target range this year of between 3 and 5 percent.

In the first nine months of the year, inflation averaged at 4.3 percent.

“Inflation in October could tip higher than September’s number due to some base effects, the impact of typhoon Pedring on prices of vegetables and fish, and the imposition of VAT [value added tax] on toll,” BSP Governor Amando Tetangco Jr. told reporters Friday.

Tetangco said the faster inflation in October is not expected to be sustained, barring any uncontrollable factors like another typhoon, as demand remains to be moderate.

On “base effects,” Tetangco explained that inflation in October last year was benign at only 2.8 percent, and so there was room for a faster growth for the same month this year.

He also said the imposition of VAT on toll has also affected overall prices.

Still, Tetangco said inflation for this year is expected to remain generally benign.

“Inflation during the policy horizon is expected to remain manageable, moderating toward year-end with the average full year 2011 [inflation] well within the target,” he said.

Because of expectations of benign inflation, the BSP has not revised interest rates since June.

The BSP’s key policy rates are now at 4.5 and 6.5 percent.