By Keisha B. Ta-asan, Reporter
HEADLINE INFLATION may have settled within the 7.4% to 8.2% range in November due to higher electricity rates and soaring prices of agricultural commodities, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday evening.
If realized, inflation would exceed the BSP’s 2-4% target for the eighth consecutive month. Headline inflation stood at 7.7% in October.
The upper end of the forecast or 8.2% would be the fastest pace recorded in 14 years or since the 9.1% recorded in November 2008.
BSP Governor Felipe M. Medalla said inflation may have peaked in November or will peak in December.
“We cannot guarantee for sure that despite the falling oil prices, and despite the appreciating peso, it’s over. But what we are sure of… is that we will be on a target consistent path and the moment you see it going down, it will continue to go down,” he said on the sidelines of the BSP Stakeholders Appreciation ceremony on Tuesday evening.
Mr. Medalla said the recent appreciation of the peso and the cut in diesel prices makes him optimistic that “the worst may be over.”
“The highest year-on-year headline inflation is either this coming report or the next one,” Mr. Medalla said.
The Philippine Statistics Authority will release the November inflation data on Dec. 6.
“Upward price pressures for (November) are expected to emanate from higher electricity rates, uptick in the prices of agricultural commodities due to severe tropical storm Paeng, and higher LPG (liquefied petroleum gas) prices,” the BSP said in a statement.
Manila Electric Co. (Meralco) earlier said the overall rate for a typical household went up P0.0844 to P9.8628 per kilowatt-hour (kWh) in November.
The agriculture sector suffered significant damage from several storms this year. Severe Tropical Storm Paeng (international name: Nalgae) was the 16th typhoon to hit the country, and caused more than P6.4 billion in agricultural damage.
Cooking gas prices rose by P3.50 per kilogram in November, ending six straight months of price cuts.
“Meanwhile, the reduction in petroleum and pork prices as well as the peso appreciation could contribute to easing price pressures for the month,” the BSP said.
In November alone, pump price adjustments stood at a net decrease of P7.5 a liter for diesel and P4 a liter for kerosene. Meanwhile, gasoline prices increased by P0.8 per liter for the month.
The peso also rebounded to the P56-a-dollar mark in November, closing the month at P56.56 on Tuesday, up by P1.41 or 2.5% from its P57.97 finish on Oct. 28.
The BSP expects inflation to ease in the next few months.
“More importantly, inflation is projected to gradually decelerate in the succeeding months as the cost-push shocks to inflation due to weather disturbances and transport fare adjustments dissipate,” it said.
The BSP said timely implementation of government measures will help ease price pressures.
The BSP sees inflation averaging 5.8% for this year and 4.3% for 2023, before easing to 3.1% in 2024.
“We are confident that the path of inflation will be target consistent and that by 2024 inflation will be closer to 3% than to 4%,” Mr. Medalla said.
NO NEED TO MIRROR FEDMeanwhile, Mr. Medalla said the BSP may no longer need to mirror the US Federal Reserve’s policy tightening if the strong dollar begins to wane in the coming months.
“(The highest) year-to-date peso depreciation was about 15%. Now it’s below 10% and it’s not just the Philippines. It’s a global trend now that people are saying that maybe the Fed is already close to eventually pausing and will no longer do jumbos of 75 (bps),” Mr. Medalla said.
The BSP has increased borrowing costs by 300 basis points (bps) since May to tame inflation and stabilize the peso, bringing the key policy rate to 5%.
As of the peso’s close on Tuesday, the peso has weakened by P5.56 or 9.8% from its P51 close on Dec. 31, 2021. There was no trading on Wednesday.
Asked if the BSP will continue to increase interest rates in its coming meetings, Mr. Medalla said that it would be very data dependent.
“What they’re saying is that US rates will rise but the rate of increase will decrease. So, in that particular case, then maybe we have room to either respond fully or partially. Depending on the data,” he said.
The US Federal Reserve has so far raised its policy rates by 375 bps since March, bringing the Fed funds rate to the 3.75-4% range. It is widely expected to deliver a smaller 50-bp rate hike on Dec. 14, a day before the BSP’s last policy setting meeting on Dec. 15.
Asked if the BSP will pause next year, Reuters quoted Mr. Medalla as saying: “Maybe the first quarter, depending on developments.”
Meanwhile, Mr. Medalla believes that the country will still be able to achieve the 6.5-8% growth targets of the Development Budget Coordination Committee (DBCC) in 2023 despite higher interest rates.
“I will say that DBCC growth targets are still feasible for next year. What do we bank on? International tourism picks up. And there’s also still quite a bit of pent-up demand,” Mr. Medalla said.
He also added that the growth forecast for the country next year by the International Monetary Fund (IMF) is “too pessimistic.”
The IMF forecasts Philippine economic growth at 6.5% this year, slowing to 5% in 2023.