BSP cheers low Sept inflation but warns of uptick during holidays

The central bank on Friday cheered the continued downtrend in the country’s inflation rate—with the September registering the most muted consumer price regime in over three years—but warned against the risks that a possible global trade war would bring.

In a statement, the Bangko Sentral ng Pilipinas (BSP) said the latest consumer price index of 0.9 percent for the last month was well within its forecast range of 0.6-1.4 percent.

This was “driven by the continued decline in rice prices and electricity rates, which offset higher prices of petroleum and selected food products,” the central bank said, adding that the latest figure was consistent with its prevailing assessment that inflation would continue to decelerate in the third quarter but then pick up slightly in the remaining months of 2019.

“The recent volatility in global crude oil prices due to geopolitical tensions in the Middle East could generate upward price pressures over the near term,” the BSP said. “On the other hand, deepening trade tensions between China and the United States along with other countries in the region have raised global economic uncertainty, which poses a downside risk to the inflation outlook.”

The central bank expects average inflation to settle within the target range of 3 percent, plus or minus 1 percentage point for this year, all the way until 2021.

Separately, ING Bank Manila’s senior economist Nicholas Mapa noted since the bottlenecks that caused last year’s supply side-oriented price spikes were addressed, “inflation has decelerated quickly all the more after the central bank’s 175-basis point rate hike barrage.”

He concurred with the central bank’s assessment that inflation would likely normalize upward over the short term once base effects fade.

“Price pressures appear to be benign as food prices are expected to be more stable given new legislation and government’s openness to importing foodstuffs,” Mapa said. “With this environment, the BSP if afforded scope to ease policy rates further should other data points warrant it but for the most part the price objective remains well in hand.”