Inflation Seen At 5 Percent This Month

The domestic rate of price increases is expected to breach the 5-percent level this month as weather disturbances and higher fuel prices continue to push prices of commodities and utilities up.

Photo Insert: Weather disturbances and higher fuel prices have contributed to the price spike.

The inflation rate last August surged to 4.9 percent, the highest since the 4.4 percent in January 2019, due to faster increases in the heavily-weighted food and non-alcoholic beverages index according to a PNA report.

“We expect inflation to move past 5 percent as recent and approaching storm systems will undoubtedly figure into this month’s fruit and vegetable inflation numbers. Fish and meat prices will also likely remain elevated at a time that energy costs rise as crude oil has stayed close to USD70/barrel,” ING Bank Manila senior economist Nicholas Mapa said in a report on Monday.

Mapa said utility prices will also contribute to accelerated inflation rate following the announcements by utility firms, as well as retail fuel companies of another round of price hikes.

Inflation slowed to its lowest for the year at 4 percent last July before the big jump in the following month.

The average inflation in the first eight months this year stood at 4.4 percent, above the government’s 2 percent to 4-percent target band until 2023.

Mapa said while the expansion in imports “may be a sign of renewed demand, it also reflects an improvement in domestic production that could help increase the supply of basic goods and services.”

“Despite this, the price pressures appear to be accelerating at the worst possible time with base effects unfavorable in September,” he said, referring to the 2.3-percent inflation rate in September last year.

With these developments, Mapa said monetary authorities will continue to be in a dilemma even after the aggressive rate cuts last year to ensure that economic activities remain robust despite the pandemic.

Last year, the Bangko Sentral ng Pilipinas’ (BSP) policy-making Monetary Board (MB) slashed the central bank’s key policy rates by 200 basis points to a record-low 2 percent for the overnight reverse repurchase (RRP) facility to encourage lending activities.

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