By Luisa Maria Jacinta C. Jocson, A reporter
HEADLINE INFLATION may rose in November as prices of key food items rose due to the impact of several typhoons, analysts said.
A BusinessWorld a survey of 15 analysts conducted last week showed an average estimate of 2.5% for November’s consumer price index (CPI), within the central bank’s forecast of 2.2% to 3% for the month.
If observed, November’s print would have been slightly faster than October’s 2.3% clip but slower than 4.1% in the same month last year.
The Philippine Statistics Authority is scheduled to release inflation data for November on Dec 5.
“In November, we expect inflation to increase by 2.5%. It’s a small uptick that highlights the impact of several typhoons in October to November, which affected the prices of vegetables, causing the general food inflation to increase slightly,” said Ruben Carlo O. Asuncion, economist at Union Bank of the Philippines, Inc., .
In November alone, several typhoons hit the Philippines. The Philippines saw six typhoons enter its area of responsibility during the month, according to the Philippine Atmospheric, Geophysical, and Astronomical Services Administration.
The latest data from the Department of Agriculture showed that agricultural damage due to typhoons Nika, Ofel and Pepito reached P785.68 million.
“We expect November’s inflation rate to slightly increase to 2.5% from October’s print of 2.3%, driven in part by supply challenges caused by bad weather,” said Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr.
“The weekly vegetable price data seems to have been hit by typhoons as the month-on-month increase has increased faster than in October,” he added.
The Department of Agriculture (DA) said last month that it expects the prices of lowland vegetables to continue to rise as the storm damage has disrupted production.
Vegetable prices tend to rise by about 10-15% immediately after typhoons, the DA said.
Sarah Tan, an economist at Moody’s Analytics, also said that food inflation will be the main reason for the expected increase in the November issue, mainly because of the bad weather.
“Among them, the destruction of rice crops was worst as the major rice producing regions in the country, Cagayan Valley and Central Luzon, were severely affected by the rain and landslides,” said Ms. Tan.
“Since domestic rice production is decreasing, the importation of rice is expected to increase to fill that gap. Even if rice prices are low, rice prices would have gone up,” he added.
Chinabank Research also noted that the rise in prices is due to higher prices of essential foods such as fish, meat and eggs.
POWER, PESOS
“To add to the pain, utility providers increased electricity prices in November from the previous month as they pass on some of the cost of generating electricity to consumers,” Ms Tan said.
Manila Electric Co. it also increased the total price by P0.4274 per kilowatt-hour (kWh) to P11.8569 per kWh in November from P11.4295 per kWh in October.
Ms Tan also cited higher fuel prices during the month.
In November, the pump price adjustment stood at a total of P1.70 per liter of gasoline, P3.20 per liter of diesel and P1.60 per liter of kerosene.
“Local pump prices rose in November, as recent events threatened the availability of oil in the global market,” Metropolitan Bank & Trust Co. said. (Metrobank).
Security Bank Vice President and Head of Research Angelo B. Taningco also noted the impact of the recent devaluation of the peso.
The peso fell to the P59-per-dollar level twice during the month, hitting record lows on November 21 and 26.
“The disproportionate depreciation of the peso in November may add to inflationary pressures this month,” said Mr. Neri.
In the remaining months of the year, inflation is likely to remain within the target band of 2-4%, say analysts, but potential risks to this outlook have been flagged.
“Despite the pressure associated with the typhoons and the tension in the country, inflation will remain within the BSP’s target of 2-4% until the end of the year,” said Metrobank.
Chinabank Research said inflation will remain within the BSP’s target band, barring any unexpected shocks. However, it noted that adverse weather conditions may be detrimental to food prices.
The central bank expects inflation to reach 3.1% this year. In the first 10 months, headline inflation averaged 3.3%.
“Inflation is likely to remain under control in the next six months, supported by a slow rise in rice prices and stable commodity prices amid a slowdown in major economies like China,” Mr Neri said.
“However, we also see risks that could drive inflation higher, such as weather disruptions and the potential for the peso to continue to depreciate,” he added.
IT’S EASY TO CONTINUE
As inflation is expected to remain according to the terms set, the central bank will continue its cycle of reducing rates, say analysts.
“I still think that the BSP will remain on their tapering schedule as inflation seems to be staying within their targets,” said an economist at Oikonomia Advisory & Research, Inc. Reinielle Matt Erece.
Pantheon’s Chief Emerging Economist Miguel Chanco said weaker-than-expected gross domestic product (GDP) growth in the third quarter will also prompt further rate cuts.
“I doubt that the coming inflation will have an impact on the BSP meeting (in December), which is likely to be dominated by the GDP of the third quarter, which we think will persuade the Monetary Board to relax. another 25 points (bps) next month,” he said.
The economy grew 5.2% annually in the July to September period, down from a revised 6.4% growth in the second quarter and 6% last year.
This was also the weakest growth in five quarters or since the 4.3% growth in the second quarter of 2023.
“Although GDP growth in the third quarter was low, it could be differentfour goal to reach our 2024 goal is at least 6%. “This may prompt the BSP to resume rate cuts to allow the economy to grow,” added Mr. Erece.
Mr. Taningco said he expects the BSP to cut rates by another 25 bps in December as “inflation remains manageable.”
“With the 2024 inflation rate close to the middle of the target, the probability of another 25-bp cut at the December meeting of the Monetary Board is high due to price pressures that are still manageable compared to their assessment at their previous meeting in October,” said Mr. Asuncion.
BSP Governor Eli M. Remolona, Jr. earlier said the Monetary Board could lower or keep rates steady at its Dec meeting. 19, the last revision of this year’s policy.
By the year 2025, an economist at Sun Life Investment Management and Trust Corp. Patrick M. Ella expects rate cuts of up to 100 bps.
“We expect 100 bps next year (based on our model), but we are open to a small chance of a rate freeze in the first quarter if the Fed also takes a break from cutting rates. Apart from that, we see the BSP not interrupting their 2025 rate cut cycle,” he said.
Mr. Remolona also previously said that the Monetary Board could lower the rate in the ballpark of 100 bps, but noted that this will not be the case for all meetings.
“Decisions on target inflation and target growth leave enough room for the BSP to introduce another 25-bp rate cut at its last meeting in December and introduce another rate cut of 75 bps in 2025 to support growth,” said Metrobank. .
On the other hand, analysts have pointed out the dangers that could cause the BSP’s easing cycle to go off schedule.
Mr. Neri said the decisions of the Monetary Board may depend on the behavior of the peso in the coming weeks.
“The currency has been under pressure recently, reflecting market changes in the Federal Reserve’s lowered expectations due to the expected inflation of the economic policies of Donald Trump and the Chairman of the Fed. [Jerome] Powell’s comments were demeaningwith the urgency of reducing prices,” he said.
The central bank may choose to keep rates tight if the Fed does not continue to cut rates or if the peso breaks the P60-dollar level, added Mr.
“Continued upward pressure on inflation may prompt the BSP to reassess the pace of its easing cycle,” Metrobank said.
Mr. Asuncion also noted that there may be a “hawkish break” as the BSP said earlier that the balance of risks in the outlook for inflation next year is up to then. 2026 changed up.
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