The Bangko Sentral ng Pilipinas on Thursday announced a higher inflation forecast of 6.2 percent for this year, up from its 5.8 percent previous estimate and 6.1 percent estimate by external analysts due to supply issues of agricultural goods.

BSP Monetary Board Member Romeo Bernardo said elevated prices of agricultural goods might persist as the drought caused by El Niño is expected to last until the first quarter next year.

The Philippine Statistics Authority reported food inflation slowed to 7.1 percent in October from 10 percent in the previous month, following the harvest season of rice. As a result, October's overall inflation decelerated to 4.9 percent from 6.1 percent in September.

Extend EO 10 implementation

To help ensure slower inflation, Bernardo said the government should consider extending the implementation of Executive Order 10 which lowers tariff rates on imported agricultural goods, including rice and corn.  The said EO will expire by the end of next month.

Prices of rice imports surged after India banned exports of its non-white basmati rice. India announced it would resume exporting rice in May next year.

He also suggested expanding Kadiwa stores which cut costs of agricultural goods by selling them directly from farmers to consumers.

Apart from food prices, Bernardo said the P40 increase in daily minimum wage of private-sector employees in Metro Manila might create additional inflationary pressure through higher consumer spending, forcing businesses to increase prices to meet their demand for goods and services.

Core inflation remains elevated

Even without the volatile items such as food, Bernardo said core inflation remains elevated at 5.3 percent in October, slightly down from 5.9 percent in September which signals continued strong consumer spending.

"Accordingly, the BSP is prepared to undertake follow-through monetary policy action as necessary to prevent supply-side pressures on prices from leading to additional second-round effects and dislodging inflation expectations," Bernardo said.

BSP's Monetary Board is set to announce on 16 November whether to keep its policy rate at 6.5 percent. BSP adjusts its interest rates for private banks to restrain consumer spending and ultimately slow inflation.

For 2024, BSP expects inflation to settle at 4.7 percent, higher than 4.1 percent of external analysts.