Inflation in August likely rose to 5 percent from 4.7 percent in July on elevated global oil prices and the impact of recent typhoons on agricultural products, a bank economist said Monday.
Rizal Commercial Banking Corp. chief economist Michael Ricafort said world rice prices were among 15-year highs on warmer weather and reduced rainfall in some rice-exporting countries.
He also noted the higher local and global fuel costs, “with global crude oil prices among four-month highs recently” which might have contributed to the uptick in inflation in August.
“The net increase in oil/fuel prices since July 2023 could lead to higher prices of other goods and services in the economy [passed on costs] that could lead to some pick up in overall inflation,” Ricafort said.
“The higher base/denominator effects on global crude oil prices could diminish and eventually normalize especially starting September 2023 that could lead to some risk of re-inflation for the coming months especially by early 2024,” he said.
The Philippine Statistics Authority reported that inflation in July eased to a 16-month low of 4.7 percent from 5.4 percent in June, pulled down by slower year-on-year increase in housing, water, electricity, gas and other fuels at 4.5 percent from 5.6 percent.
This was the sixth consecutive month of deceleration in the headline inflation and the lowest since March 2022’s 4 percent.
The July 2023 inflation was also slower than 6.4 percent a year ago. This brought the average inflation in the first seven months to 6.8 percent, still higher than the target range of 2 percent to 4 percent for 2023.
The PSA will release the official August inflation report in the first week of September.
Bangko Sentral ng Pilipinas Governor Eli Remolona earlier said there was still room for local monetary authorities to increase the prevailing interest rates, if needed, without contracting the economy.
Remolona said the third pause of the Monetary Board on Aug. 17, 2023 was a “prudent” move, but the BSP remained ready to hike if the upside risks materialized.
The BSP raised the policy rates by a total of 425 basis points to 6.25 percent between May 2022 and March 2023, before taking a prudent pause during the last three Monetary Board meetings amid the sustained easing of inflation.
Remolona said the BSP is providing a forward guidance to the market in terms of monetary policy and will avoid a sudden change in course to establish financial stability.