Inflation soars to four-year high

INFLATION accelerated to 6.9 percent in September, the Philippine Statistics Authority (PSA) reported on Wednesday, the highest in four years, mainly driven by higher food prices.

It was markedly higher than the 4.1 percent logged a year earlier.

It brought year-to-date inflation to 5.1 percent, nearing the upper end of the 4.5 to 5.5 percent expected by the government for 2022.

Prospects for further policy rate hikes were heightened. The Bangko Sentral ng Pilipinas (BSP), which wants to keep consumer price growth from 2.0 to 4.0 percent, had forecast September inflation to hit from 6.6 to 7.4 percent. 

"The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability," the central bank said in a statement.

It said inflation risks remained "broadly balanced," with price pressures expected to come from higher global non-oil prices, pending petitions for further fare hikes, the impact of weather disturbances, as well as a sharp increase in sugar prices.

"The impact of a weaker-than-expected global economic recovery continues to be the main downside risk to the outlook," it added.

PSA Undersecretary Claire Dennis Mapa said that higher food prices across different regions.

"Reducing inflation would really mean reducing food inflation. That really is one of the reasons why inflation went up, not just nationwide but also regional inflation," he added.

Mapa said the PSA was also keeping an eye on the peso's decline against the US dollar as a further depreciation would have a "spillover" impact.

The Department of Finance (DoF) said inflation was expected to stay elevated for the rest of the year given recent fare hikes and the impact of Super Typhoon "Karding" on food supplies.

"Inflation is still seen to fall within the 4.5 percent [and] 5.5 percent assumption of the Development Budget Coordination Committee for 2022," it said.

Continued timely implementation of government measures would be crucial in mitigating the impact of persistent supply-side pressures on food and other commodity prices, the DoF added.

These include "ramping up local production, ensuring timely importation of goods, fertilizers and raw materials, and improving distribution efficiency."

"Given regional production and price disparities, it is equally important that these goods are efficiently distributed," the DoF said.

"The government is already looking at regions where inflation is high and which goods are driving inflation to address any bottlenecks."

The National Economic and Development Authority pointed out that rising inflation was not confined to the Philippines, noting that other countries were being affected by surging commodity prices, logistics bottlenecks, weather shocks, and a strengthening US dollar.

Increasing since March

Rizal Commercial Banking Corp. chief economist Michael Ricafort said the inflation has steadily increased since March 2022, blaming the Russia-Ukraine war that started on Feb. 24, 2022, which increased global oil prices and other global commodities earlier this year.

"Global crude oil and other commodity prices have already eased recently amid the risk of recession in the US, which is the world's largest economy, due to aggressive interest rate hikes by the US Federal Reserve in the quest to bring down elevated US inflation from 40-year highs," said Ricafort.

He added that some lockdowns in China, which is the world's second-largest economy, also caused inflation.

"Inflation could still peak around October 2022 at around 7 percent and could mathematically ease [after that]," added Ricafort.

A significant catalyst for inflation in the Philippines includes Super Typhoon Karding storm damage in Central and Northern Luzon, especially hard-hit provinces.

"[These regions] are among the biggest producers of rice, corn, vegetables, and other food/agricultural products," Ricafort said.



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