Inflation has yet to peak, BSP official says

MANILA, Philippines — Inflation is not yet done accelerating, and consumers can expect a faster rise in consumer prices this month even as there are already signs of a coming slowdown, an official of the Bangko Sentral ng Pilipinas said on Tuesday.

"Year-on-year, it (inflation) could increase next month... There’s a good chance that it would be higher next month," said Felipe Medalla, member of the central bank's Monetary Board.

"(But) we expect month-on-month (inflation) to start normalizing already," he added.

The BSP's seven-member Monetary Board is its policymaking body for monetary policy to control inflation. Medalla sits on the board chaired by BSP Governor Nestor Espenilla Jr.

His statements on Tuesday came after the government reduced its economic growth target for the year to 6.5-6.9 percent from the original 7-8 percent due to fast-rising consumer prices.

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During the board's meeting, economic managers also revised upwards its forecast for inflation this year to 5.2 percent from 4.8 percent and for 2019, from 3 to 4 percent.

In the first three quarters of the year, inflation averaged 5 percent, falling way above the BSP's 2-4 percent goal. For September alone, inflation reached a near decade-high of 6.7 percent, which BSP said early this month was already the peak.

Rising fuel prices could push inflation further

Medalla, however, said rising global oil prices could push inflation up further this month when compared to year-ago levels. Tight rice supplies could also prove inflationary.

"But almost definitely, we will see a deceleration month-on-month and over the long-term, this could mean we can expect inflation to slow down from there," he explained.

Government typically highlights price changes from same period last year. It does, however, include seasonally-adjusted and monthly inflation metrics that measure price changes on a monthly basis.

Medalla said these monthly metrics are showing "slowing" inflation last September, which could continue this month and soon be reflected on year-on-year data. 

The month-on-month changes would also be the BSP's basis on whether it needs to raise interest rates more to temper inflation. 

The central bank has already adjusted benchmark rates by a cumulative 150 basis points this year. High interest rates discourage consumers from borrowing, which in turn, reduces money being lent for consumption and investments, thereby reducing demand and prices.

"If there are signs that inflation is abating month-on-month, we may take a pause," Medalla said.