Analysts see inflation falling below 3 percent in September

MANILA, Philippines — Inflation likely slowed for a second straight month in September, hitting below three percent amid slower food prices and favorable base effects, a poll of leading economists showed.

BPI lead economist Jun Neri said the consumer price index (CPI) likely eased to 2.4 percent in September from the seven-month low of 3.3 percent in August.

He said rice prices are still on a downward trend during the month. Other sources of downside pressures may also come from lower prices of meat, vegetables and oil as well as the appreciation of the peso against the US dollar.

However, the downside pressures could be offset by faster increases in electricity rates, higher cooking gas prices and elevated prices of fish and fruits.

Based on data from the Philippine Statistics Authority (PSA), inflation averaged 3.6 percent from January to August, remaining within the two to four percent target range of the Bangko Sentral ng Pilipinas (BSP) for the year.

The PSA is scheduled to release the September inflation data on Friday, Oct. 4.

Philippine National Bank economist Alvin Arogo expects inflation to hit 2.8 percent in September. If realized, this would match the 2.8-percent print in January.

“The steady food and non-alcoholic beverages CPI in August provides buffer against the potential adverse impact of the current and upcoming typhoons on overall food prices,” he said.

He also noted that the impact of lower rice tariff rates, downtrend in imported commodities such as Vietnam rice and Dubai crude oil as well as favorable base effects should lead to an average inflation of three percent from September to December.

Security Bank chief economist Robert Dan Roces said inflation will likely fall to 2.5 percent in September mainly due to slower food prices.

“However, potential risks from oil and typhoons may keep the BSP cautious about interest rate cuts. The central bank is likely to opt for a gradual approach, with 25-basis point reductions in October and December,” Roces said.

Likewise, UnionBank chief economist Ruben Carlo Asuncion said disinflation from food and transport CPI will likely pull down September inflation at 2.8 percent.

“Particularly, we expect declines from rice prices and lower gasoline or diesel prices from declining global prices. The continuation of faster disinflation in September further validates an October BSP rate cut of 25 basis points,” he said.

At its August meeting, the BSP’s Monetary Board cut borrowing costs by 25 basis points to 6.25 percent from 6.50 percent previously. This was the first time the Philippine central bank reduced rates in nearly four years.

Prior to the cut, the BSP kept its policy rate steady for six straight meetings since November 2023. From May 2022 to October 2023, it hiked rates by 450 basis points to tame inflation and stabilize the peso.

Vincent Conti, senior economist at S&P Global Ratings, said the BSP may cut 75 basis points in the fourth quarter, bringing down the key policy rate to 5.50 percent by end-2024.

“The BSP was one of the most aggressive in hiking rates within the region, and so has more space to normalize rates downwards as well,” he said.