Manulife Investment Management expects the Philippines’ September inflation rate to rise above 2 percent on food supply disruptions from recent typhoons and a suspension of rice imports.
Jean de Castro, head of fixed income at Manulife Investment Management, said recent movements in global fuel prices and peso volatility could also add to inflation risks.
“Food supply shocks from recent typhoons and rice import restrictions will likely influence the BSP’s September inflation forecast,” De Castro said.
“Against this backdrop, headline inflation in the coming months could exceed 2 percent with additional upside risks if weather disturbances persist,” she said.
She said “movements in global oil prices and peso volatility may also introduce risks, in addition to higher import costs and waning base effects from 2024’s low inflation levels.”
Despite these pressures, De Castro still expects inflation to remain within the Bangko Sentral ng Pilipinas’ (BSP) 2 percent to 4 percent target range.
The inflation rate in August was 1.5 percent, up from 0.9 percent in July.
De Castro said while the BSP has maintained a supportive policy stance, rising inflation could limit the bank’s ability to cut interest rates further in 2025.
The release of the BSP’s third-quarter business and consumer expectations survey could also be an important factor in the movement of interest rates.
“In an environment where the BSP’s Business and Consumer Expectations Surveys show a slowdown/caution, the BSP would most likely pause from additional rate cuts to help bolster domestic demand and spur the economy,” De Castro said.
She said a possible slowdown in the domestic economy could be offset in the last quarter of the year by an expected pickup in spending during the Christmas holidays and the seasonal increase in remittances from overseas Filipinos.
“Overall, we believe that the BSP would maintain a more supportive monetary policy stance in this scenario,” she said.
