MANILA: Inflation rose in August at its fastest pace in five months, fuelled by a sharp climb in food prices, particularly vegetables, after heavy monsoon rains and flooding damaged crops.
Even with the pickup, overall price growth remained subdued, leaving the central bank room to cut borrowing costs further if other economic indicators justify it.
The consumer price index climbed 1.5% from a year earlier, quickening from July’s 0.9% increase, the Philippine Statistics Authority said last Friday.
That was the steepest gain since March’s 1.8%.
The August reading also exceeded market consensus, topping the 1.2% median forecast of economists surveyed by the Inquirer last week.
Still, it landed squarely within the Bangko Sentral ng Pilipinas’ (BSP) projected range of 1 to 1.8%.
Zooming out, this marked the sixth consecutive month that inflation fell short of the government’s official 2% to 4% target.
Figures showed vegetable price inflation bolted 10% in August, the fastest increase since January’s 21.1% surge.
In Metro Manila, vegetable prices surged 26.5%, outpacing the 6.9-% increase in areas outside the capital region.
National statistician Claire Dennis Mapa said the spike reflected the impact of heavy rains in late July, which carried over into the following month.
The costlier vegetables offset the faster decline in rice prices, which fell by a record 17%. As a result, the overall food index rose 0.9%, reversing July’s 0.2%.
“While inflation remains broadly manageable, the recent figures highlight how adverse weather conditions directly impact prices,” said Economy, Planning and Development Secretary Arsenio Balisacan.
The stretch of subdued price gains could influence the central bank’s next policy steps.
In August, the central bank trimmed its benchmark rate by a quarter point to 5%, a level BSP governor Eli Remolona Jr described as “Goldilocks”, neither too low to fuel inflation nor too high to choke economic growth.
Analysts now said the BSP’s easing cycle is close to running its course. But Remolona has kept its options open, signalling the Monetary Board could consider another reduction at its October or December meetings if demand showed signs of weakening.
Aris Dacanay, an economist at HSBC, said the door remained open for another rate cut this year.
“The upside surprise increases the risk of the BSP holding onto the monetary reins,” he said.
“But we don’t think it completely derails the possibility of a rate cut.”
Analysts at Chinabank Research said inflation could continue to edge higher due to base effects and upward price pressures from food and energy.
But they added that price gains will likely remain low.
“This could leave open the possibility of another interest rate cut from the BSP before the end of the year,” they said. — The Philippine Daily Inquirer/ANN
