Inflation proved stubborn after it unexpectedly quickened for the first time in seven months in August, due largely to an uptick in food and transport costs, keeping the pressure on the central bank to maintain its hawkish stance.
The consumer price index (CPI) rose 5.3 percent year-on-year in August from 4.7 percent the previous month and is within the Bangko Sentral ng Pilipinas’ (BSP) 4.8 percent to 5.6 percent projection for the month.
This brings the year-to-date inflation rate to 6.6 percent, higher than the Development Budget Coordination Committee (DBCC) assumption of 5 to 6 percent for full year 2023.
Excluding volatile energy costs, core inflation eased to 6.1 percent in August from the previous month’s 6.7 percent .
Rice inflation increased to 8.7 percent in August from 4.2 percent in July 2023. The expected reduction in rice production due to El Niño and the export ban recently imposed by major rice exporters such as India and Myanmar led to higher international rice prices.
In addition, the alleged hoarding incidents, artificial shortage, and speculative business decisions of market players may have put further upward pressure on the domestic retail price of rice. Vegetable inflation, on the other hand, rose to 31.9 percent from 21.8 percent due to production losses from the enhanced monsoon rains and Super Typhoon Egay.
“Despite the ongoing challenges we encounter, such as severe weather conditions and trade limitations imposed by other nations, our objective remains to achieve an inflation rate between 2 and 4 percent by the year’s end,” said Secretary Arsenio Balisacan of the National Economic and Development Authority.
Finance Secretary Benjamin Diokno for his part said the government is resolute in its commitment to mitigate the impact of inflation and help protect our consumers, retailers, and farmers.
“While we are seeing a slight uptick, our inflation rate assumption of 5 to 6 percent for full year 2023 remains doable,” Diokno said.
Tuesday’s data affirmed the BSP’s belief the country was not yet out of the inflation woods and raised the possibility it could resume raising its policy rate after keeping it steady at 6.25 percent at its last three meetings.
Following the data, the BSP said in a statement it “stands ready to adjust the monetary policy stance as necessary” to prevent the broadening of price pressures and emergence of additional second order effects.
August inflation brought year-to-date inflation to 6.6 percent , well outside the central bank’s 2 percent -4 percent comfort range.
ING economist Nicholas Mapa said rice, transport and electricity costs will determine inflation path for next few months. While he expects the BSP to stay on hold, he said in a post on platform X, it “could consider a hike if this becomes a trend.”
The Bangko Sentral ng Pilipinas (BSP) next meets on Sept 21 to review policy.
To keep food prices at bay, the Philippines has imposed price ceilings on rice, which it said would remain in effect as long as the government deemed them necessary. Food accounts for 35 percent of CPI.
