Inflation seen to climb as upside risks linger

Inflation is projected to climb in the coming months as supply-side pressures and the extension of rice import restrictions threaten to push prices higher, which could prompt the Bangko Sentral ng Pilipinas (BSP) to keep policy rates unchanged.

Following the slight uptick in inflation to 1.7 percent in September from 1.5 percent in August, analysts said this may mark the start of a gradual pickup after months of subdued readings, with weather-related disruptions and policy measures posing upside risks toward year end.

HSBC ASEAN economist Aris Dacanay said that while September’s below-consensus figure still falls below the BSP’s two to four percent target range, rice prices would be a key factor to watch in the next few months after the government extended its rice import ban until the end of the year.

“This is a major upside risk to inflation that needs to be monitored,” he said. “But importers have frontloaded their rice orders in anticipation of the ban, leading to ample supply by end-August. If local farmers were able to harvest before Typhoon Nando hit, rice supply may be sufficient to keep prices stable through year end.”

Despite the soft inflation reading in September, HSBC expects the BSP to pause its easing cycle this week before resuming rate cuts in December.

“We think September inflation sets the stage for a quarter-point rate cut in the fourth quarter to 4.75 percent. But we still expect the BSP to wait for more data on gross domestic product and rice prices before continuing its easing cycle,” Dacanay said.

He added that the policy rate could fall to 4.50 percent by the first quarter of 2026 if inflation remains stable.

Economists at Citi echoed the view that the BSP would likely stay on hold in October, even as it eyes further rate cuts toward the end of the year.

“Following tame inflation readings in September, we continue to expect a gradual rebound of the headline into the three-percent handle in 2026,” Citi said.

“Growth concerns could eventually resurface, leading to a cut before the end of the year. However, as economic data is so far mixed, BSP will probably pause in the October meeting.”

Citi expects inflation to stay between 1.3 and two percent year-on-year through the first quarter of 2026 before rising to around 3.5 percent by end-2026.

BPI lead economist Jun Neri also flagged that inflation risks remain tilted to the upside, particularly due to weather disturbances and import restrictions.

Neri expects inflation to stay near two percent for the rest of 2025 before climbing to around 3.5 percent by mid-2026 and nearing four percent by the third quarter next year as base effects fade and supply risks persist.

“With inflation likely to pick up in the coming months, the pace of monetary easing may slow down,” Neri said. “A more conservative approach is justified as cutting rates aggressively could leave the economy vulnerable to inflation shocks that might force a sharp policy reversal later on.”

The BSP has so far cut policy rates by a total of 150 basis points since August 2024, bringing the benchmark rate to five percent.

The Monetary Board is scheduled to hold its final policy review for the year on Dec. 11.

Source: Philstar

Philippine annual inflation at 1.7% in September

Philippine annual inflation quickened for a second month, but it was still below the central bank’s 2% to 4% comfort range for the year, reinforcing expectations that a policy decision this week will be a close call between cutting rates and pausing.

The consumer price index rose 1.7% in September led by higher food prices, up from August’s 1.5%, the statistics agency said on Tuesday. It was below the 2.0% median forecast in a Reuters poll, and brought year-to-date average inflation to 1.7%.

The September rate, the fastest since March, comes just days before the central bank’s penultimate policy meeting of the year on Thursday.

“For the upcoming policy meeting, the Monetary Board will review newly available information and reassess the impact of prior monetary actions in light of evolving economic conditions and their implications for inflation and growth,” the Philippine central bank said in a statement.

At its August policy meeting, the Bangko Sentral ng Pilipinas (BSP) signalled another reduction was still possible this year before it concludes its easing cycle.

Ahead of the data, HSBC economist Aris Dacanay said in a note the October 9 policy decision could be a close call between a pause and another rate cut.

Mr. Dacanay said he expects the BSP to keep its key policy rate unchanged at 5.0%, following three consecutive quarter-point reductions. He added that a 25-basis-point cut remains possible at the BSP’s December meeting.

“While waiting for more data to come, inflation concerns, particularly on food, should also weigh on the decision,” Mr. Dacanay said.

Food inflation in September slightly accelerated to 0.8% from 0.6% in August, driven mainly by higher prices of vegetables, tubers, plantains, and cooking bananas, the statistics agency said.

Core inflation, which strips out volatile food and energy prices, was at 2.6%, close to the previous month’s 2.7%.

Source: Business World

Philippine inflation quickens to 1.5% in August

Headline inflation picked up to 1.5% in August, driven by higher food, electricity and fuel prices, the Philippine Statistics Authority (PSA) reported on Friday.

Last month’s consumer price index (CPI) was faster than the 0.9% in July but slower than the 3.3% logged a year ago.

The August print fell within the central bank’s 1%-1.8% forecast for the month.

August also marked the sixth month in a row that inflation settled below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

For the first eight months, headline inflation averaged 1.7%, on par with the BSP’s 1.7% target for 2025.

Meanwhile, core inflation, which excludes volatile prices of food and fuel, quickened to 2.7% from 2.3% in July and 2.6% last year. It averaged 2.4% in the January-August period.

The heavily weighted food and nonalcoholic beverages were the primary driver of faster inflation during the month, National Statistician Claire Dennis S. Mapa said

Source: Business World