The country’s headline inflation rate surged to 3.7 percent in March due to the soaring prices of food and transportation during the month, the Philippine Statistics Authority said on Friday.

In a briefing, National Statistician and PSA chief Claire Dennis Mapa said the 3.7-percent headline inflation rate — or the pace of increase in the prices of goods and services — rose from 3.4 percent in February, but was much lower than the 7.6 percent recorded in March 2023.

Core inflation, which leaves out volatile food and energy items from the consumer basket, decelerated to 3.4 percent in March 2024, declining from the preceding month’s 3.6 percent and notably lower than the 8.0 percent recorded in March 2023.

Year-to-date, the average inflation rate stands at 3.3 percent.

March’s 3.7-percent rate is close to the upper limit of the government’s targeted inflation range of 2 percent to 4 percent. This indicates a consecutive increase in inflation for the second month in a row, following a downward trend over the past four months.

“Our expectation is (inflation) will increase ... until July because of the (low) base effect unless there is an intervention that will happen in the market that will bring down prices,” Mapa said.

“We expect it will gradually slow down in August,” he added.

Higher food prices

At the briefing, Mapa said the rise in inflation last month was primarily fueled by higher prices of food and non-alcoholic beverages — increasing from 4.6 percent in February to 5.6 percent in March.

The national statistician said the prices of transportation services likewise increased month-on-month from 1.2 percent in February to 2.1 percent in March, followed by restaurants and accommodation services, which climbed from 5.3 percent to 5.6 percent.

Rice inflation surged to 24.4 percent in March, marking its most substantial rise since topping 24.6 percent in February 2009. This segment contributed almost half of the overall inflation rate for March.

Mapa explained that the persistent substantial double-digit increase in rice inflation was attributed to a low base effect observed from January to July 2023, during which inflation for this agricultural commodity remained relatively low.

Hawkish stance

Meanwhile, Security Bank chief economist Robert Dan Roces said the accelerated headline inflation in March would likely prompt the Bangko Sentral ng Pilipinas to maintain a hawkish stance, possibly prolonging the period of higher interest rates to prevent destabilizing inflation expectations.

During its monetary policy meeting in February, the Monetary Board opted to maintain interest rates at 6.5 percent, a level they had held steady since an unscheduled increase in October 2023. The Monetary Board is scheduled to reconvene on Monday, 8 April, to consider any adjustments to the primary policy rate.

“While the headline inflation figure is lower than expected, rising food prices remain a concern,” Roces said.

BDO Trust and Investments Group chief investment officer Frederico Ocampo, for his part, said the BSP will refrain from lowering interest rates until the latter part of 2024.

“As inflation goes down again below 4 percent and becomes a trend — not only one point but a trend — that’s when they will cut interest rates,” Ocampo said.

Eyes on the price

Meanwhile, Albay Rep. Joey Salceda said Thursday that the country’s economic managers must monitor the supply and price of rice, one of the main drivers of the increased headline inflation in March.

Salceda, chairperson of the House Committee on Ways and Means, said the government must be laser-focused on rice as it is the “greatest driver” of overall prices.

He said food inflation accounted for 57 percent of the total inflation in March, which rose to 3.7 percent from the previous month’s 3.4 percent.

“As I said last month, it’s all about rice. Without the abnormal price of rice in the global market, inflation would have been closer to 3.1 percent, which is well within acceptable range,” he said.

He added, “Corn prices are declining. Fish prices are down. Vegetables are cheaper this year than last year. And even sugar prices are slightly down. Bread prices are mildly up, but that is attributable partly to the correlated prices of wheat and rice, especially in India, where they are substitutes.”

Last month, Salceda turned down the proposal to increase rice imports since the harvest season would begin in April, and the election in India, which imposed a rice export ban, will take place in May.

He cited the significant progress being made by Secretary Francisco Tiu Laurel in the Department of Agriculture — including the “clean up” in the National Food Authority, which was embroiled in allegations of corruption — that will help make cheap rice available, especially to the poor, and provide a better market for rice farmers.

“(Secretary Laurel) has brought machinery distribution, for example, to about 92 percent of the target. The P12-billion rice farmer financial assistance is also set to be completed this June — again just in time for planting,” he said.

According to Salceda, the DA has also been more active in delivering programs from the Agricultural Credit Policy Council’s Survival and Recovery Loan program.

He said the Philippine Crop Insurance Corporation has also begun making indemnity insurance payments to farmers affected by the drought.