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(MENAFN – ING) September inflation at 2.3%
Inflation fell to 2.3% (from 2.4% in August) despite an unfavorable base, and price gains for certain foods weighed on the headline. Overall price gains remained subdued, although transportation costs accelerated to 8.3%, offset by food inflation, which slowed to 1.5%, from 1.8% in August. Headline inflation was at 2.5%, at the lower end of Bangko Sentral ng Pilipinas (BSP) inflation target of 2-4%.
Philippines inflation
PSA
Anemic demand and strong peso help limit price increases, but BSP is likely on hold
The peso continues to outperform its Asian peers, posting a 4.78% gain so far this year and helping to limit imported inflation for most of the year. With the economy in recession, consumer demand remains anemic as unemployment remains high at around 10% during the first half of the year. Despite the anemic trend in price movements, we do not expect BSP to react with a policy adjustment anytime soon given Governor Diokno’s recent comments. We do not expect BSP to resort to additional rate cuts for the rest of the year as Diokno waits to assess the impact of the wave of rate cuts earlier in the year. Inflation will likely stabilize at 2.4% in 2020 and will help preserve the purchasing power of Filipino consumers in the economic downturn. However, we also note that the downward trend in inflation points to a weakening of economic momentum, as consumer demand remains constrained despite recent government measures to gradually reopen the economy.
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