Inflation seen to accelerate further in September — economists

Headline inflation likely went again in September amid higher food prices and high base effects, private sector economists said over the weekend.

A Daily Tribune poll of analysts in late September yielded a median estimate of 5.5 percent for June inflation, within the 5.3 percent to 6.1 percent forecast range given by the Bangko Sentral ng Pilipinas (BSP) last Friday.

If realized, the median estimate will be faster than August's 5.3 percent headline inflation rate but slower than the 6.9 percent clip a year ago.

September is also expected to be the 18th consecutive month inflation surpassed the BSP's 2 to 4 percent target range.

Philippine Statistics Authority is expected to release the September inflation data on 5 October.

Michael Ricafort, chief economist at Rizal Commercial Banking Corp., expects September's inflation rate to accelerate due to the increases in the cost of fuel and food.

"Main catalysts for inflation (include) higher local palay and rice prices (…) partly due to warmer weather/reduced rainfall in some Asian countries that produce/export rice, resulting in reduced rice exports," Ricafort told Daily Tribune in a Viber message.

He added that higher local and global fuel prices, which is one of the causes of higher transport prices in the country, is also another contributor to the latest pick up in headline inflation.

In another emailed commentary, Security Bank chief economist Robert Dan Roces expected the September 2023 inflation rate to increase by 0.5 percent on a month-on-month basis.

"The main factors contributing to this month's inflation are increases in the cost of electricity and food. These sectors have been subject to supply constraints and higher production costs, which have been passed on to consumers," Roces said.

Despite the slight uptick, Roces said that inflation is likely to be on a downward path in the next few months.

Meanwhile, Chinabank chief economist Domini Velasquez said that the prices of some key food commodities remained elevated in September, particularly fish and fruits.

"Increases in the cost of fuel and (liquified petroleum gas) as well as the weaker peso also added to upward pressures," Velasquez said.

"On a positive note, rice and vegetable prices, which were the primary drivers of food inflation in August, eased due to the mandated rice price cap and relatively favorable weather (i.e. no strong typhoons this month)," she added.

Velasquez also noted that the higher electricity rates from major power suppliers like Meralco were offset by lower rates in other provinces such as Batangas, Pampanga, and Bohol.

Despite the uptick in inflation in August and September, our current projections show that inflation is still on track to return to the BSP's 2-4% target range in Q4, possibly November, barring any new shocks.

Hence, we think that the BSP can still keep its policy rate on hold at 6.25% this year, especially if Q3 GDP comes out weaker than anticipated. Moreover, recent shocks to inflation were on the supply side which could be addressed by non-monetary measures. However, we are cognizant that another rate hike in November is a live possibility if the peso weakens further given another Fed rate hike.