Inflation kicks up to 3.5% in Oct

The country’s inflation rate quickened to a three-year high in October, driven largely by higher fuel and food prices as well as the weaker peso, the Philippine Statistics Authority (PSA) reported yesterday.

Inflation, the movement of prices of basic goods and services, accelerated to 3.5 percent in October, higher than the 2.3 percent in the same month in 2016 and 3.4 percent a month ago.

The latest inflation figure was the highest since November 2014, when it registered 3.7 percent. It, however, matched analysts’ forecast and within the Bangko Sentral ng Pilipinas’ 3.2-3.7 percent projection for the month.

“We still expect full year inflation to stay within our target of two to four percent. However, upside risks become more prominent as the holiday season approaches. This warrants close monitoring of the rising prices in domestic petroleum as well as utility rates,” Socioeconomic Planning Secretary Ernesto Pernia said.

Core inflation, which excludes select food and energy items, slightly eased to 3.2 percent from 3.3 percent in September.

Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said inflation remains manageable over the policy horizon despite the uptick in October.

He said the consumer price index would settle within the two to four percent target set by the central bank from 2017 to 2019.

“Firm domestic economic activity, ample liquidity, and well-anchored inflation expectations continue to support within-target inflation,” Espenilla said.

Espenilla said monetary authorities would remain vigilant against any risks to the inflation outlook to ensure that the monetary policy stance remains consistent with the mandate of preserving price stability conducive to economic growth.

The Monetary Board of the central bank is scheduled to hold its rate-setting meeting tomorrow.

Euben Paracuelles, economist at Nomura Securities Ltd., said inflation would expand to around 3.7 percent for the rest of the year amid rising oil prices and further rise to 3.9 percent with the implementation of the first package of the comprehensive tax reform program.

“We see some risk that the hikes could be delivered earlier if recent oil price increases persist and second-round effects manifest themselves more quickly given the strength of domestic demand,” he said.

Inflation for the food sub group quickened to 3.8 percent in October from 3.7 percent the previous month because of faster price increases in corn, meat and vegetables.

Pernia attributed the higher prices for corn and vegetables to the lingering effects of Typhoon Jolina, Tropical Depression Maring and Typhoon Pablo.

Pernia said the government needs to monitor developments in climate conditions, considering weather patterns and events have a direct impact on food supply and prices.

“We must also ensure a stable and sufficient level of the country’s rice stock. This is an important policy concern given that rice comprises a sizable portion of the CPI (Consumer Price Index) basket. Deciding the appropriate timing of rice importation is vital to avoid supply disruptions. There is also a need to amend domestic laws to end the quantitative restrictions on rice,” he said.

Non-food inflation, meanwhile, accelerated to 3.2 percent in October from 3.1 percent a month ago and from 1.5 percent in the same period last year.

Pernia said crude oil prices may increase in the near-term due to the continuing increase in global oil demand.

“Upbeat consumer spending this holiday season is also expected to push prices up. Within the near-term, higher utility rates, increasing domestic fuel prices, and the depreciation of the peso may further exert upward pressures on inflation,” Pernia said.