After hitting a continuous downtrend since February, consumer prices spiked in August to its highest level so far this year, the Philippine Statistics Authority (PSA) yesterday said.
Inflation jumped to 4.9 percent last month from 4 percent the previous month, pushed by higher food and energy prices. This brings the year-to-date average to 4.4 percent.
PSA said the heavily-weighted food and non-alcoholic beverages rose by 6.5 percent during the month, from 4.9 percent in July 2021. The indices of alcoholic beverages and tobacco, clothing and footwear, housing and other fuels and transport also posted higher monthly increments.
By specific food item, PSA noted double-digit annual growth rates in the indices of meat, fish and vegetables.
Benjamin Diokno, Bangko Sentral ng Pilipinas (BSP) governor, said the latest outturn is consistent with their assessment that “inflation could settle close to the high end of the target range in the near term before decelerating back to within the target range by year end.”
“In 2022-2023, inflation will likely fall towards the midpoint of the target, supported by the continued and timely implementation of non-monetary measures and reforms to address directly supply-side pressures on key food items,” Diokno said.
Diokno maintained that the risks to the inflation outlook remain broadly balanced over the policy horizon but the uptick in international commodity prices due to supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation.
Karl Kendrick Chua, socioeconomic planning secretary, said the government “will continue to adjust and strengthen its policies to ensure that the people have access to affordable food amid the pandemic.”
“We are beginning to see the impact of our proactive interventions to ease food prices, especially pork and rice,” Chua said.
Chua added that as granular lockdowns are implemented to curb the spread of the COVID-19 due to the Delta variant, they will keep enabling key sectors of the economy to operate and ensure essential goods and services reach consumers.
“Keeping transportation available and affordable, while still following minimum public health standards, will help facilitate the movement of people, goods, and services. All these will allow people to safely earn income and keep prices stable,” Chua said.
Nicholas Mapa, ING Bank senior economist, said the BSP will likely loom past the inflation surge as Diokno “continues to vow support for the fledgling economic recovery.”
“Elevated inflation will likely sap some momentum from household consumption in the near term (but) a BSP rate hike will not likely be able to address the current food price spike nor make imported energy cheaper. We fully expect BSP to retain its accommodative stance all the more with the economy still in the midst of a recession,” Mapa said.
The policymaking Monetary Board last month decided to keep the key rates of the BSP unchanged as it sees downside risks to domestic economic growth and the likelihood of inflation remaining above government target.
This is the sixth straight session that the policymaking body decided to keep the key rates steady.
“We expect elevated inflation and the recently recorded 6.9 percent unemployment level to weigh on the economic recovery. We expect full year GDP (gross domestic product) to slide to 3.8 percent, below the official government estimate of 4-5 percent. The peso will likely remain pressured in the near term as BSP signals it will not likely adjust policy rates to combat this current spike in prices,” Mapa said.
SB Equities Inc. also said the latest inflation result for August may likely encourage the BSP to keep rates steady, prompting it to revise its full-year 2021 inflation average to 4.5 percent.
“The BSP may look through this food-driven CPI (consumer price index) jump, as the prospect of a gradual recovery will likely keep the central bank accommodative for an extended period. We also think that this latest inflation reading supports the case against any further rate cuts,” SB Equities said.
“For the local fixed-income market, the higher-than-expected August inflation print appears to be priced-in and turning out to be more of an event risk for the time being. The curve steepening in the past weeks appear to be supporting the current levels as well,” it added.
remain broadly balanced over the policy horizon but the uptick in international commodity prices due to supply-chain bottlenecks and the recovery in global demand could lend upside pressures on inflation.
Karl Kendrick Chua, socioeconomic planning secretary, said the government “will continue to adjust and strengthen its policies to ensure that the people have access to affordable food amid the pandemic.”
“We are beginning to see the impact of our proactive interventions to ease food prices, especially pork and rice,” Chua said.
Chua added that as granular lockdowns are implemented to curb the spread of the COVID-19 due to the Delta variant, they will keep enabling key sectors of the economy to operate and ensure essential goods and services reach consumers.
“Keeping transportation available and affordable, while still following minimum public health standards, will help facilitate the movement of people, goods, and services. All these will allow people to safely earn income and keep prices stable,” Chua said.
Nicholas Mapa, ING Bank senior economist, said the BSP will likely loom past the inflation surge as Diokno “continues to vow support for the fledgling economic recovery.”
“Elevated inflation will likely sap some momentum from household consumption in the near term (but) a BSP rate hike will not likely be able to address the current food price spike nor make imported energy cheaper. We fully expect BSP to retain its accommodative stance all the more with the economy still in the midst of a recession,” Mapa said.
The policymaking Monetary Board last month decided to keep the key rates of the BSP unchanged as it sees downside risks to domestic economic growth and the likelihood of inflation remaining above government target.
This is the sixth straight session that the policymaking body decided to keep the key rates steady.
“We expect elevated inflation and the recently recorded 6.9 percent unemployment level to weigh on the economic recovery. We expect full year GDP (gross domestic product) to slide to 3.8 percent, below the official government estimate of 4-5 percent. The peso will likely remain pressured in the near term as BSP signals it will not likely adjust policy rates to combat this current spike in prices,” Mapa said.
SB Equities Inc. also said the latest inflation result for August may likely encourage the BSP to keep rates steady, prompting it to revise its full-year 2021 inflation average to 4.5 percent.
“The BSP may look through this food-driven CPI (consumer price index) jump, as the prospect of a gradual recovery will likely keep the central bank accommodative for an extended period. We also think that this latest inflation reading supports the case against any further rate cuts,” SB Equities said.
“For the local fixed-income market, the higher-than-expected August inflation print appears to be priced-in and turning out to be more of an event risk for the time being. The curve steepening in the past weeks appear to be supporting the current levels as well,” it added.
