Inflation seen at highest level in over three years
Inflation may have accelerated to as high as 7.4 percent in September, potentially the fastest pace in three-and-a-half years, as bad weather lifted food prices while costlier fuel and a weaker peso added to price pressures.
Manila, Philippines — Inflation may have surged to 7.4 percent in September, potentially the fastest pace in three-and-a-half years, as severe weather boosted food prices while more expensive fuel and a weaker peso contributed to price pressures, according to the Bangko Sentral ng Pilipinas (BSP). The central bank stated that headline inflation, or the overall increase in costs of goods and services commonly bought by households, likely hovered between 6.4 and 7.4 percent in September, surpassing the 6.1-percent rate in August.
This would be faster than the 7.6 percent recorded in March 2023, making it the highest since then. Even the lower end of the range would be an acceleration from August and push inflation beyond the BSP's target of 2 to 4 percent, marking the seventh consecutive month of inflation exceeding the target. The Philippine Statistics Authority, which publishes the official inflation data, will release the September figures on October 6.
Upward price pressures in September are likely due to weather-related hikes in the prices of vegetables, fish, rice, and fruits, the BSP noted. Higher domestic petroleum prices and the peso's depreciation may also have played a role, as a weaker peso increases the local cost of imported fuel, food, and raw materials, which could ultimately be passed on to consumers.
Lower meat prices and electricity rates may have partially offset these pressures. The BSP will closely monitor incoming data, especially on inflation and growth prospects, and consider the impact of recent weather disturbances and tensions in the Middle East on the country's inflation and economic outlook. RCBC chief economist Michael Ricafort predicts inflation to settle at 6.7 percent in September, within the BSP's forecast range.
He attributes the acceleration to weather-related food supply constraints, higher energy and fertilizer costs, the peso's weakness, and unfavorable base effects, where September 2023's low inflation provided a low comparison base that mechanically increased the annual rate. Ricafort also warns that a strong El Niño dry spell could further reduce agricultural production in the Philippines and across Asia, adding pressure on rice and other food prices through early 2027.
He anticipates further inflation rise in coming months due to second-round effects, where initial increases in food, fuel, or other costs trickle down to wages and a broader range of goods and services. The minimum wage in Metro Manila increased by P60, and further pass-through of higher energy and import costs could exacerbate these pressures.
The BSP has raised its benchmark policy rate by 75 basis points to 5 percent since April to curb elevated inflation, manage inflation expectations, and support the peso, although it cannot directly resolve supply disruptions caused by weather or geopolitical conflicts.
Written by urgent.news from Philippine Star Business's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
