Inflation likely to hit 6.4-6.5% this month – analysts

Inflation rate in October may have slowed down to as low as 6.4 percent from 6.7 percent in September as price pressures are expected to gradually decline as 2019 approaches, according to analysts.

“Inflation may have indeed peaked in the third quarter and this will give the BSP (Bangko Sentral ng Pilipinas) some leeway and afford the economy some breathing room after the substantial 150 bps rate hike to date,” said ING Bank senior economist, Nicholas Mapa.

ING forecasts 6.5 percent inflation for October, while the Metrobank-owned First Metro Investment Corp. and its research partner, the University of Asia and the Pacific’s (FMIC-UA&P) latest “Market Call” report projects lower, at 6.4 percent.

“Inflation’s food-and-oil driven run kept unabated by September; however, we think it has reached its peak as food supply normalizes in October,” according to FMIC-UA&P.

Mapa said that if inflation is lower than September, the BSP “could pause at its November meeting, something echoed by voting Monetary Board members in recent days.” The central bank has raised key rates four times in a row this year, to a cumulative 150 bps as of September, to curb inflation increase and manage inflation expectations.

But while October inflation may be lower than 6.7 percent last month, there are still factors that could pull it up, said Mapa. “Waning positive base effects, supply bottlenecks from the impending crop damage from Yutu (typhoon Rosita in the Philippines) and still elevated oil prices (could) limit the pace of deceleration towards year end.”

The BSP will release its October inflation forecasts today (Wednesday).

The BSP expects price pressures to breach the target range in 2019 but that the timely implementation of non-monetary measures could still pull back inflation to settle within the twofour percent government target. The BSP forecasts 2018 inflation of 5.2 percent, 4.3 percent for next year and 3.2 percent for 2020. These numbers will likely change when the Monetary Board meets on November 15 for its seventh policy meeting for the year.