BSP: October inflation may reach 8.1 percent
The Bangko Sentral ng Pilipinas (BSP) forecasts October inflation to rise to between 7.1 and 8.1 percent, potentially surpassing September’s three-year high of 7.2 percent as elevated energy costs stemming from the Middle East conflict continue to pressure domestic prices.
“Upward price pressures are likely to come from higher prices of domestic fuel, electricity, and transport fares,” the central bank said in a Friday statement.
“These pressures could be partially offset by lower prices of key agricultural commodities, such as rice, vegetables, meat, and fish, owing to favorable supply conditions.”
The elevated September inflation print, which rose for reasons similar to those cited by the BSP in its October forecast, played a key role in the central bank’s more aggressive stance on inflation, including a 50-basis-point “jumbo” rate hike enacted last week.
BSP Governor Eli Remolona Jr. said last week that the inflation outlook for next year also played a major role in the decision.
“We took this decisive action because we forecast that inflation will accelerate further in the coming months due to oil prices, transport fares, and the potential effects of El Nino on food prices,” he said.
“This decisive adjustment will appropriately tighten monetary conditions in order to contain spillover effects and firmly anchor inflation expectations.”
Remolona attributed the rate hike to several “surprising” developments.
“Oil prices went up a bit. Then we had a bump in food prices. But mainly domestic supply shocks. Transport fares went up more than we thought,” he said, noting that the first tranche of the Metro Manila wage hike—which faced several delays before being implemented on 26 September—was smaller than the BSP had expected.
The BSP sees inflation averaging 6.1 percent this year and 6 percent next year, far above its annual 3 percent target. Remolona said headline inflation could peak at 8 percent sometime next year, noting that monetary policy takes about a year to begin having an effect, bringing inflation closer to target by 2028.
“So maybe in 2027, let's say 8%. But for the poor, it's even worse, 9% in 2027,” he said.
“Because effective monetary policy operates with a lag, so by 2028, we expect the inflation rate to start to come down and begin to approach our target,” he added.
Remolona has kept the door open to further rate hikes, saying another “jumbo” increase may not be out of the question, depending on incoming data.
“I would say we remain open to further interest rate hikes. I can't say whether it will be 50 or 25 or bigger,” he said.
The BSP’s final monetary policy meeting for 2027 is slated for 17 December.