Inflation in the Philippines edged up to 2.3% in October, from 1.9% in September, due to rising food prices. Despite this increase, economists believe inflation will remain within the Bangko Sentral ng Pilipinas (BSP)’s target range of 2-4% in the coming months, driven by easing pressures on rice prices.
The Philippine Statistics Authority (PSA) reported that October’s inflation rate, though higher month-over-month, is significantly lower than last year’s 4.9%. This brings the year-to-date inflation average to 3.3%, comfortably within the BSP’s target but slightly above the agency’s full-year forecast of 3.1%.
Food Prices and Rice Inflation
One major factor in the October uptick was rice inflation, which surged to 9.6%, contributing over 30% to the overall inflation rate. However, recent trends suggest rice prices may decline. Following a July executive order that cut rice import tariffs to 15%, the price of regular-milled rice dropped to P50.22 per kilo in October from P50.47 in September.
Aris Dacanay, ASEAN economist at HSBC, noted that global rice prices are currently falling, and the resumption of India’s non-basmati rice exports could further ease local prices. “Risks to rice prices are tilted to the downside,” Dacanay stated, suggesting that rice inflation’s impact on the overall Consumer Price Index (CPI) may weaken in the months ahead.
Former Finance Secretary Margarito B. Teves also expressed optimism, pointing out that inflation should remain manageable within the BSP’s target range for the remainder of the year.
BSP’s Rate Cut Prospects Amid Currency Risks
The controlled inflation rate supports the BSP’s plans for continued monetary easing. Since August, the BSP has reduced its policy rate by 50 basis points, bringing it to 6%. Analysts expect a further 25-basis-point cut in December, lowering the benchmark to 5.75%, pending the outcome of the Monetary Board’s meeting on Dec. 19.
However, Dacanay cautioned that external risks, such as foreign exchange volatility, could prompt the BSP to briefly pause its rate cuts if the peso weakens against the dollar due to global events, including the U.S. elections. “A rate pause might be necessary if financial markets become volatile,” he added.
BSP Governor Eli M. Remolona Jr. has indicated flexibility, suggesting that the easing cycle would resume once stability returns, with the policy rate potentially settling at 5% by 2025.
The upcoming decision by the BSP will be closely watched, as it balances inflation control with the need to support economic growth amid global uncertainties.
Jaja has a degree in journalism and took classes in international law and business communication. Her career spans roles at prominent international media outlets, including International Business Times, Celebeat and Delightful Philippines. As a news editor, Jaja covered a wide range of beats, including legal, business, economy, cryptocurrency, personal finance, gaming, technology, and entertainment.