August inflation drops at 3.3%

After inflation settled at 3.3 percent in August, prices of goods and services in the remaining months might stabilize within 3 to 3.5 percent due to cheaper rice and fuels, economists said Thursday.

The Philippine Statistics Authority (PSA) reported a drop in inflation last month from 4.4 percent in July due to lower prices of food and non-alcoholic drinks at 3.9 percent from 6.4 percent. Transport costs also fell 0.2 percent from 3.6 percent.

Given the recent data, Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., expects inflation rates to remain low.

“August inflation was the slowest after January and again back within the Bangko Sentral ng Pilipinas’ target range of 2 to 4 percent. This was after the government started implementing lower tariffs on imported rice in July,” Rizal Commercial Banking Corp. chief economist Michael Ricafort said.

This month, Ricafort expects inflation to approach 3 percent or below this level.

The August inflation also settled within the central bank’s forecast of 3.2 to 4 percent. “The balance of risks to the inflation outlook continues to lean toward the downside for 2024 and 2025 with a slight tilt to the upside for 2026,” the BSP said.

“A disinflation trend may come from the continuing decline in rice prices here and abroad as India’s production may improve, and thus impact international prices of rice,” Union Bank of the Philippines chief economist Ruben Carlo Asuncion explained.

He projects inflation to fall to 3 percent in December, noting that global crude oil prices have been stable at $70 per barrel from $80 per barrel.

“You can also include as a factor the stronger peso. Across Asian currencies, units have gained about 10 percent versus the US dollar in August, so impact will be on cheaper imports,” Asuncion said.

Meanwhile, Security Banking Corp. chief economist Dan Roces said the better inflation print for August showed that “the central bank’s monetary policies and other factors are effectively curbing price increases.”

The central bank raised its policy rate for private banks to 6.5 percent from 6.25 percent in October last year to slow inflation by restraining consumer demand for goods and services. It reduced its rate back to 6.25 percent last month after household consumption slowed to 4.6 percent in the second quarter from 5.5 percent in the same period a year ago.

Upside risks

HSBC economist Aris Dacanay said inflation this month might still increase due to continuous heavy rains.

“Typhoon ‘Yagi’ (‘Enteng’) just left the archipelago and damaged agricultural lands while claiming lives. We might see a jump for September as typhoon ‘Yagi’ takes a toll on food supply,” he said.

Thus, Dacanay said, the central bank might keep its existing rate in its policy meeting in October, before possibly reducing it to 6 percent in December.

Despite slower household consumption, he noted that the business environment remains robust, suggesting the central bank is likely to maintain its current rate next month.

Rice inflation in the country slowed in August, according to the Philippines Statistics Authority (PSA) on Thursday.

In a virtual briefing, PSA chief and National Statistician Claire Dennis Mapa said rice inflation last month was 14.7 percent, slower than the 20.9 percent rate in July. Thus making it the slowest inflation since October 2023, recorded at 13.2 percent.

Mapa attributed the slower inflation rate to the staple grain’s base effects and the lower import levy taking effect.

In June, President Ferdinand Marcos Jr. issued Executive Order 62 directing the modification of nomenclature and tariff rates on various products to ensure the continuous supply of goods and protect the Filipino people’s purchasing power. Duty rates under the order for imported rice are expected to decrease by P6 to P7.

The statistics bureau further monitored movements in the average prices of three sub-rice groups: regular-milled, well-milled, and special rice.

For regular milled rice, the average price last month was P50.66 per kilo from P50.90 per kilo in July.

In August 2023, it was registered at P43.29 per kilo.