By Luisa Maria Jacinta C. Jocson, Reporter
HEADLINE INFLATION probably eased in August and returned to throughout the central financial institution’s 2-4% goal band amid a drop in costs of rice and gasoline, analysts stated.
A BusinessWorld ballot of 15 analysts yielded a median estimate of three.7% for the buyer worth index (CPI) in August. That is throughout the 3.2-4% forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.
August inflation would even be slower than the nine-month excessive of 4.4% in July and the 5.3% print in the identical month a yr in the past.
The Philippine Statistics Authority (PSA) is about to launch August inflation information on Thursday (Sept. 5).
“Increased electrical energy charges and better costs for agricultural commodities, owing to unfavorable climate situations, are the first sources of upward worth pressures for the month,” the BSP stated.
“These elements are anticipated to be offset by decrease home oil costs in addition to decrease rice, fish, and meat costs together with the peso appreciation,” the BSP stated.
Union Financial institution of the Philippines, Inc. Chief Economist Ruben Carlo O. Asuncion stated August inflation probably slowed primarily because of the decline in rice costs.
“We anticipate the decrease tariff charges for rice to be a key downward stress on costs,” Sarah Tan, an economist from Moody’s Analytics, stated in an e-mail.
Rice inflation eased to twenty.9% in July from 22.5% in June, marking the fourth straight month of slower rice inflation. Rice sometimes accounts for nearly half of general inflation.
“August final yr was the time when rice costs began to climb attributable to a worldwide provide crunch. However attributable to decrease tariff charges in 2024, rice costs have remained kind of secure, resulting in headline CPI (shopper worth index) dropping considerably on a year-on-year foundation,” HSBC economist for ASEAN (Affiliation of Southeast Asian Nations) Aris D. Dacanay stated.
In June, President Ferdinand R. Marcos, Jr. slashed the tariff on rice imports to fifteen% from 35% till 2028 in an effort to tame rice costs.
Slower inflation “might primarily have been pushed by meals basket inflation, attributed to weak rice imports and heavy rainfall disrupting native meals manufacturing,” Safety Financial institution Corp. Chief Economist Robert Dan J. Roces stated.
“These elements have probably led to sustained development in home meals costs, notably affecting rice,” he added.
In the meantime, analysts additionally famous that slower transport inflation might have contributed to inflation settling inside BSP’s 2-4% goal.
“The primary drag from the 4.4% headline fee in July ought to come from a giant fall in transportation inflation, going by the fabric drop in pump costs over the previous couple of weeks,” Pantheon Chief Rising Asia Economist Miguel Chanco stated.
“Including to the disinflationary impulse is the significant discount in gasoline costs all through the month,” Mr. Dacanay stated.
In August alone, pump worth changes stood at a internet lower of P2.70 per liter for gasoline, P2.80 per liter for diesel, and P3.70 per liter for kerosene.
“We estimated a double-digit annual development drop of 10% in retail petroleum costs, and diesel costs have the most important gross sales quantity that would partially offset the estimated electrical energy fee hike of 6.7% yr on yr for August,” Mr. Asuncion stated.
Then again, analysts additionally famous potential upside dangers to inflation in August, such because the affect of Hurricane Carina and the southwest monsoon that hit Luzon in late July.
“The affect from Hurricane Carina that struck in July is predicted to point out up in August’s print by way of larger costs for agricultural produce like greens,” Ms. Tan stated.
Newest information from the Agriculture division confirmed that agricultural injury from Hurricane Carina and the southwest monsoon stood at P4.73 billion. Rice was probably the most affected crop, accounting for 22.9% or P1.08 billion of the general injury.
“We consider that favorable base results, particularly for rice, will outweigh the lingering hostile affect of Tropical Melancholy Butchoy and Hurricane Carina on general meals costs,” Philippine Nationwide Financial institution economist Alvin Joseph A. Arogo stated.
Additionally, Ms. Tan stated utilities inflation probably accelerated in August as Manila Electrical Co. (Meralco) raised electrical energy costs.
In August, Meralco hiked charges by P0.0327 per kilowatt-hour (kWh), bringing the general fee of P11.6339 per kWh for a typical family from the earlier month’s P11.6012 per kWh.
ROOM FOR MORE RATE CUTS?
With inflation probably in a downtrend, analysts anticipate that the central financial institution will be capable of proceed its easing cycle.
“Ought to the inflation print in August and the following couple of months confirm that July’s spike was only a blip, and that inflation is certainly in a downtrend because the BSP expects, it will give BSP confidence to ship one other fee minimize within the fourth quarter,” Ms. Tan stated.
In August, the Financial Board decreased the goal reverse repurchase (RRP) fee by 25 foundation factors (bps) to six.25% from the over 17-year excessive of 6.5%.
This was the first time the BSP minimize charges in practically 4 years or since November 2020.
The BSP might additional scale back charges as a way to match any US Federal Reserve fee cuts, Rizal Industrial Banking Corp. Chief Economist Michael L. Ricafort stated.
“We expect it will assist the BSP’s rate-cutting cycle and we anticipate a minimum of one other 25-bp minimize within the fourth quarter. If the Fed cuts aggressively at 50 bps, the BSP is more likely to match this fee minimize,” Patrick M. Ella, economist at Solar Life Funding Administration and Belief Corp., stated.
Cash markets are confidently pricing the Fed’s first 25-bp minimize of this cycle at its September assembly, with a 33% probability of a jumbo 50-bp discount, Reuters reported.
“Sustained deceleration in August might translate to 1 extra RRP minimize and a attainable 0.5% to 1% discount within the RRR earlier than the yr ends,” Financial institution of the Philippine Islands Lead Economist Emilio S. Neri, Jr. stated.
BSP Governor Eli M. Remolona, Jr. earlier stated that they will ship one other 25-bp fee minimize within the fourth quarter.
For his half, Mr. Dacanay expects to see the coverage fee at 6% by end-2024.
“We additionally anticipate core CPI to proceed its gradual moderation, many due to the central financial institution’s tight grip on financial coverage, offering the BSP room to chop coverage charges by 25 bps to six% by yearend,” he added.
Then again, De La Salle College economist Mitzie Irene P. Conchada stated there are some dangers that would delay the BSP’s continued coverage easing.
“Exterior elements similar to calamities and exterior occasions might have an effect on inflation and lead to an upward pattern in direction of the top of the yr. Moreover, I feel that the BSP will hold its rates of interest in its subsequent coverage assembly,” she stated.
The BSP’s final two coverage conferences of the yr are scheduled on Oct. 17 and Dec. 19.
