October inflation sped up to 3.5%
The inflation rate in October accelerated to 3.5 percent from 3.4 percent a month ago, the fastest in almost three years, driven mainly by higher annual increases in the prices of alcoholic beverages and tobacco, utilities and fuel products, the Philippine Statistics Authority said Tuesday.
The October rate brought the average inflation in the first 10 months to 3.1 percent, slightly higher than the midpoint of the government’s official target range of 2 percent to 4 percent this year.
The October inflation was the fastest since the 3.7-percent recorded in November 2014, confirming the earlier projection of the Finance Department that consumer prices likely peaked for the month. It was also significantly faster than 2.3 percent a year ago.
However, Bangko Sentral ng Pilipinas Governor Nestor Espenilla Jr. said inflation would remain manageable over the policy horizon after taking into account the latest assessment of price levels in October.
“Inflation is projected to settle near the midpoint of the national government’s target range of 2 to 4 percent in 2017 to 2019. Firm domestic economic activity, ample liquidity, and well-anchored inflation expectations continue to support within-target inflation,” Espenilla said.
He said the monetary authorities would remain vigilant against any risks to the inflation outlook to ensure the monetary policy stance remains consistent with the mandate of preserving price stability conducive to economic growth.
National Economic and Development Authority director-general and Economic Planning Secretary Ernesto Pernia said upside risks became more prominent as the holiday season approached.
“This warrants close monitoring of the rising prices in domestic petroleum as well as utility rates,” Pernia said.
Pernia added the government must be consistently on the watch for developments in climate conditions, considering that weather patterns and events had a direct impact on food supply and prices.
“We must also ensure a stable and sufficient level of the country’s rice stock. This is an important policy concern given that rice comprises a sizable portion of the CPI basket. Deciding the appropriate timing of rice importation is vital to avoid supply disruptions. There is also a need to amend domestic laws to end the quantitative restrictions on rice,” Pernia said.
ING Bank Manila senior economist Joey Cuyegkeng said a mildly higher inflation in October was unlikely to move Bangko Sentral to tighten monetary policy.
“BSP is likely to keep monetary policy settings steady for the rest of the year. Expectations of strong economic activity and moderate inflation argue for steady policy decision. BSP’s inflation outlook over the policy horizon at near the mid-point of the 2 percent to 4 percent inflation target range supports a steady policy settings at least in the very near term,” Cuyegkeng said.