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The country’s headline inflation likely remained unchanged in September as food and oil prices remained stable, analysts surveyed by The Manila Times said.
Projections for the month ranged from 2.3 to 2.5 percent with an average of 2.4 percent, matching the inflation figure for August, but higher than the 0.9 percent recorded a year ago.
The Bangko Sentral ng Pilipinas (BSP) previously projected that inflation would be between 1.8 and 2.6 percent.
The Philippine Statistics Authority (PSA) will release official inflation data for September on October 6.
Analysts at Rizal Commercial Banking Corp. (RCBC) and Security Bank Corp. (SBC) projected inflation to stand at 2.5 percent.
RCBC chief economist Michael Ricafort said easing of community quarantine restrictions likely led to increased demand and resulted in a rebound in prices for many goods and services.
“As the government allowed the reopening of more industries such as tourism and easing restrictions on public transport, inflation would rise accordingly along with demand as well, from unusually low levels when quarantine standards were much more stringent” Ricafort said.
However, he noted that this was offset by falling world oil prices that led to lower transportation costs.
“The government allowed the reopening of more jeepney and bus routes which would also help ease transportation costs as the economy reopens further, but the capacity of public transportation systems remains restricted to prevent Covid- 19 (coronavirus disease 2019) to spread further keeping transport prices relatively higher after Covid-19 due to the reduction in supply as seen in recent months, ”said Ricafort.
According to Ricafort, a stronger exchange rate of the peso against the US dollar may help keep import costs relatively lower and would help to moderate inflationary pressures and still support the benign inflation environment.
The local currency is currently trading within the P48: $ 1 level, compared to the closing rate of P50.64: $ 1 at the end of December 2019.
However, SBC Chief Economist Robert Dan Roces explained that as most regions, including the National Capital Region, reverted to a general community quarantine (GCQ), mobility has increased and this may have exerted upward pressure on transportation costs.
“On the other hand, the price movements of the main items in the food basket continue to be varied: the cost of rice and vegetables continues to fall, while the price movements of fish and pork rose slightly,” said Roces.
PSA data showed that rice prices fell in the first week of September, and the average retail price for regular milled rice fell to P37.91 per kilogram from P38.08 per kilogram the previous week.
Roces said inflation is likely to remain stable and is projected to average 2.5 percent this year.
Risks to the upside include rising world oil prices and some recovery in consumption following a more relaxed quarantine measure. On the other hand, downside risks include high unemployment and slower overall demand.
HSBC Global Research and ANZ Research, meanwhile, forecast inflation to hit 2.3 percent.
According to HSBC, oil and food prices nationwide have been relatively stable compared to August.
Meanwhile, demand for other components of the CPI (consumer price index) basket likely remained tepid in light of the ongoing lockdown in Metro Manila (NCR). Given the still elevated Covid-19 cases in the Philippines, we do not expect domestic demand to recover significantly by the end of the year, ”HSBC said in a report.
HSBC said inflationary pressures are also likely to remain subdued with inflation averaging 2.4 percent this year and 2.7 percent in 2021 as economic activity recovers moderately.
ANZ Research in a report revealed that food inflation likely rebounded due to inclement weather.
However, he noted that the inflation outlook will likely remain benign, allowing Bangko Sentral ng Pilipinas to maintain an accommodative monetary policy stance.
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