Inflation in October could have fallen to as low as 0.5 percent, the Bangko Sentral ng Pilipinas (BSP) said in its forecast on Thursday, due to lower rice and oil prices.
The BSP Department of Economic Research said inflation rate last month likely settled within the range of 0.5 percent to 1.3 percent.
“The increases in electricity and water rates, as well as higher prices of LPG and selected food items are seen as the primary sources of upward price pressures for the month. Meanwhile, inflation could be tempered by lower domestic oil and rice prices,” the BSP said.
“Looking ahead, the BSP will remain watchful of evolving inflationary conditions to ensure that the monetary-policy stance remains consistent with the BSP’s price stability mandate,” it added.
Should inflation hit the lower end of the BSP’s forecast for the month, this will be the slowest acceleration of local consumer prices the Philippines has seen in three years.
In February 2016, inflation fell to 0.5 percent. During that year, the hike in consumer prices averaged 1.3 percent.
In their September 26 monetary policy meeting, BSP Assistant Governor Edna Villa said the BSP’s inflation forecast was slightly reduced to 2.5 percent on average for the year. The inflation forecasts for 2020 and 2021, however, remained unchanged.
In the near term, Villa said inflation could continue to decelerate and breach the low end of the target range primarily due to base effects. For 2020 and 2021, she said the BSP took into consideration the recovery in domestic growth and the “positive adjustments” as the impact of the rice tariffication tapers off.
The BSP also said the balance of risks to the inflation outlook have shifted toward the upside for 2020, while it is seen to tilt to the downside for 2021.
“Upside risks to inflation over the near term emanate mainly from volatility in oil prices due to geopolitical tensions in the Middle East and from the potential impact of the African swine fever outbreak on food prices,” said BSP Governor Benjamin E. Diokno.
“Meanwhile, the subdued pace of global economic activity continues to temper the inflation outlook,” he added.
Diokno said falling inflation —in stark contrast to last year’s acceleration—allowed the BSP to cut policy rates further. The BSP has already punched in a total of 75 basis point cut for the year.
The BSP’s next monetary policy meeting is scheduled on November 14.