Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Monday inflation in November 2021 would likely moderate to 3.7 percent from 4.6 percent in October, following a series of oil price rollbacks and the appreciation of the peso against major currencies.
Diokno said in a statement the November inflation would settle within a range of 3.3 percent to 4.1 percent, with the lower oil prices offsetting the higher electricity rates.
“Higher electricity and LPG prices along with uptick in the prices of meat, fish, fruits and vegetables are the primary sources of inflationary pressures for the month,” Diokno said.
“These could be offset in part by rollbacks in domestic petroleum prices and the appreciation of the peso,” he said.
Data from the Philippine Statistics Authority showed that inflation eased to a two-month low of 4.6 percent in October from 4.8 percent in September, pulled down by lower annual increases in the prices of food and non-alcoholic beverages.
The October print, however, remained faster than the 2.5 percent inflation in the same month last year. This brought the average inflation from January to October to 4.5 percent, still above the 2021 target range of 2 percent to 4 percent.
Diokno said earlier inflation was expected to average above the target range in 2021 but would ease close to the midpoint of the target range in 2022 and 2023.
He said the balance of risks to the inflation outlook remained on the upside for the remaining months of 2022, but continued to be broadly balanced for 2022 and 2023.
The private sector’s inflation expectation is also consistent with inflation reverting back to the target by 2022. In 2020, inflation averaged 2.6 percent, below the midpoint of the target range.
The Monetary Board, the policy-making body of the Bangko Sentral ng Pilipinas, retained the overnight borrowing rate at a record low of 2 percent on Nov. 18 to continue supporting economic recovery amid the pandemic.
It was the eighth straight monetary policy meeting where the policy rate was kept at 2 percent since Nov. 19, 2020.
The board said also inflation was projected to settle close to the midpoint of the target range in 2022 and 2023.
Diokno said while the risks to the inflation outlook shifted towards the upside for 2022, they remained broadly balanced for 2023. Upside risks are mainly linked to the potential impact of weather disturbances on the prices of key food items, petitions for transport fare hikes and the possibility of a prolonged recovery of domestic pork supply.
He said the strong global demand amid persistent supply-chain bottlenecks could also exert further upward pressures on international commodity prices. The uncertainties in food supply require determined reforms to improve farm productivity and competitiveness, he said.
“Meanwhile, potential delays in the lifting of domestic containment measures, as well as the emergence of more virulent COVID-19 variants, could dampen prospects for both global and domestic demand and thus temper inflationary pressures,” he said.