By Lee C. Chipongian
The Bangko Sentral ng Pilipinas (BSP) forecasts an October inflation range of 6.2 percent to 7 percent with upward pressures coming from continued high oil prices during the month.
September inflation climbed to a nine-year high of 6.7 percent and based on both the BSP and private sector forecasts, could be the peak for the year.
The BSP did not announce a single-rate, mid-range forecast this time, unlike in its August and September monthly forecasts, but said that its earlier – and consistent – announcement that inflation will reach its highest level in the third quarter – may have been spot on after all.
The central bank’s Department of Economic Research said that its latest projection corresponds to a month-on-month inflation forecast range of -0.2 to 0.6 percent and reiterated that their projections are “in line with (its) assessment that inflation is likely to have peaked in the third quarter 2018 in the absence of further price shocks.”
“Upward price pressures from domestic petroleum prices and water rates in Manila Water and Maynilad-serviced areas could be offset by the lower prices of rice and other food items as well as the downward adjustment in Meralco power rates,” explained the BSP.
It added that it will “continue to closely monitor evolving trends in prices and inflation expectations, and will undertake necessary measures towards its commitment to price stability.”
The government will release October inflation numbers on Tuesday, November 6.
Inflation rose to 6.2 percent in the third quarter from the quarter ago-average of 4.8 percent. This brought the year-to-date average inflation to five percent and breaching the two-four percent government target for 2018.
Core inflation – which excludes certain volatile items from the consumer price index – also increased to 4.7 percent during the quarter, higher than the rates posted in the previous quarter and a year ago. In the third quarter, inflation pressures continue to come from rising food and energy prices.
While the BSP expects price pressures to breach the target range in 2019, they also think that the timely implementation of non-monetary measures such as rice tariffication, will help bring back the inflation outlook back to the target band.
The Monetary Board – BSP’s policy-making arm – on September 27 raised its 2018 inflation forecast to 5.2 percent from an earlier estimate of 4.9 percent. Next year’s inflation outlook has now breached the two-four percent target, at 4.3 percent from a previous forecast of 3.7 percent while the 2020 forecast remains at 3.2 percent.
The BSP’s next policy meeting is on November 15.