Inflation likely peaked in October – analysts

INFLATION could pick up again in October due to higher food and commodity prices, as well as rising fares, according to economists polled by The Manila Times.

The median forecast among the five analysts was 7.3 percent, within the Bangko Sentral ng Pilipinas (BSP) estimate of 7.1 to 7.9 percent for the month and up from September’s 6.9 percent. Some supported the BSP’s forecast that consumer price growth will begin to decline.

Official inflation data is due to be released by the Philippine Bureau of Statistics today, November 4th.

Nicholas Antonio Mapa, senior economist at ING Bank Manila, said inflation could rise to 7.3 percent in October as price pressures remained heightened.

“High-priced goods (energy and food) in addition to local supply chain disruptions (hurricane damage) are likely to drive up prices. Spillovers also propagate with current wages and transport rates. Demand pressure also remains strong as consumption continues with the reopening of the economy,” he said.

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Chinese Banking Corporation. Chief Economist Domini Velasquez, who also expects a 7.3 percent result, pointed to widening secondary round effects.

Headline inflation, according to DBS economist Han Teng Chua, will move away from BSP’s annual target of 2.0 to 4.0%. Like Velasquez and Papa, Chua also gave a 7.3 percent forecast for October.

“October inflation data was likely boosted by faster supply-driven food price increases exacerbated by typhoons, continued spillovers from higher public transport fares since October due to rising global oil prices and pressure on import prices due to a weaker currency,” he said. said.

Robert Dan Roses, an economist and assistant vice president at Security Bank Corp., explaining his estimate of 7.1%, said that “price pressures remain offset by rising costs, although pre-holiday demand growth means core inflation will continue.” elevated.”

That, however, is likely to ease after the holiday season by early January, said Michael Ricafort, chief economist at Rizal Commercial Banking Corp., who also had a 7.1% forecast.

He stressed that the peso exchange rate had already stabilized for some time below the record level of 59 pesos:$1, which “in this way could help reduce import prices/costs and general inflation,” he added.

“Prices of other major global commodities such as wheat, soybeans, natural gas, coal, iron, steel, copper, nickel and others have started to decline recently. [and] this could help ease inflationary pressures/headline inflation in the coming weeks/months…” he added.

Apart from any other unforeseen shocks, Velázquez said that inflation likely peaked in October and will slowly slow down in the coming months “until it hits BSP’s 4 percent target by the second half of 2023.”

“Key risks will include the government’s failure to address current and potential shortages and possible increases in electricity tariffs. The proposed increase in water tariffs next year could lead to an increase in average inflation in 2023 above the upper BSP target after averaging over the calculated value. 5.6 percent this year,” she added.

Similarly for Roces, inflation is likely to return to the BSP target range of 2.0 to 4.0% “only by mid-2023.”

BSP Governor Felipe Medalla signaled in late October that the central bank needed to be “a little aggressive” in tightening policy to bring inflation into its target range. He said the series of BSP rate hikes offered only a “50 percent chance” of reaching its inflation target next year.

For Chua, “aggressive” rate hikes may have to be counterbalanced by a slowdown in economic growth. “Overall, we see a 50 to 75 basis point upside risk from our end-2022 BSP discount rate forecast of 5 percent.”

Ricafort said further rate hikes are still possible, “confirmed by broadly stronger/better economic data, and also depending on future Fed rate hikes and future peso exchange rate behavior.”