The rate of inflation jumped to a nine-year high of 6.4 percent in August from 5.7 percent in July, on soaring prices of rice, fish and other food products, the Philippine Statistics Authority said Wednesday.
Analysts said the latest inflation data could compel the Bangko Sentral ng Pilipinas to raise interest rates again this month, after a total of 100-basis-point adjustments in three separate Monetary Board meetings this year. The Bangko Sentral ng Pilipinas overnight borrowing rate of 4 percent is currently below the inflation rate.
BSP Governor Nestor Espenilla said conditions warranted “more decisive non-monetary measures.”
“Elevated oil prices also continue to impact transport and power prices. At the same time, the peso [along with other currencies] is being adversely affected by emerging market uncertainties and a strong
US dollar. These are adding to the cost-push pressures,” Espenilla said in a statement.
“However, it is equally apparent that strong domestic demand is making it too convenient for producers and traders to pass on higher costs and possibly more to consumers,” he said.
Data from the PSA showed that the August inflation was the fastest in more than nine years, or since it hit 6.6 percent in March 2009. It exceeded estimates made by the government and private sector economists and was faster than 2.6 percent recorded a year ago.
This brought average inflation in the first eight months to 4.73 percent, beyond the government’s official target range of 2 percent to 4 percent for the year.
Espenilla said an unfortunate confluence of cost-push factors continued to drive consumer price inflation in August “beyond the acceptable target range.”
He said the BSP would be looking more closely at the latest data to reassess the medium-term inflation forecast. He said external developments should also be considered, including the US Federal Reserve actions that could exert undue pressure on the peso.
“Under the circumstances, we will weigh the need for further monetary policy action. Appropriate recommendations will be presented to the MB [Monetary Board] on Sept. 27 at its next policy meeting. It is most critical at this point to restore inflation back to the target range soonest and securely anchor inflationary expectations,” Espenilla said.
Alcoholic beverages and tobacco posted the highest price increase of 21.6 percent in August, followed by food and non-alcoholic beverages at 8.5 percent; furnishing, household equipment and routine maintenance of the house at 3.5 percent; health and restaurant and miscellaneous goods and services at 4 percent; and recreation and culture at 2.4 percent.
The rest of the commodity groups either moved slower or declined with the index of clothing and footwear retaining at the previous month’s annual growth rate of 2.4 percent.
Economic Planning Secretary Ernesto Pernia said a committed effort from agencies in the agriculture sector to boost output and introduce policy reform was needed to bring down prices of agricultural products.
“The government, particularly the Department of Agriculture, must act quickly and fervently with sound judgment to ease the increasing prices of agricultural commodities, which are the main drivers of inflation,” Pernia said.
“While the government’s economic team expected inflation to peak in the third quarter before tapering off towards the latter part of the year, inflation in August is largely beyond the median market forecast. That is why we remain steadfast in putting forward measures that will address prices, especially for food,” Pernia said.
Damage to agriculture brought about by southwest monsoon and typhoon Karding in Ilocos, Cagayan, and Cordillera regions amounted to P33.5 million, thus taking a toll on the prices of agricultural commodities.
“The rehabilitation of the disaster-stricken agriculture areas must be highly prioritized,” Pernia said.
Palay production growth also slowed down to 1.68 percent in the first half from 12.06 percent a year ago.
The country’s total rice stocks inventory of the National Food Authority further declined to 1.9 million metric tons as of Aug. 10, 2018. This was around 15 percent lower than the levels in the previous month.
“The NFA should fast-track the distribution of remaining inventories, alongside the completion of the government’s 250 thousand MT rice imports from Thailand and Vietnam in the last week of August to build its rice inventory, a necessary step to temper inflation,” Pernia said.
He also cited the weak performance of the fisheries and other crops, with output falling 2.14 percent and 0.44 percent, respectively, in the first half.