FILIPINOS have not seen the worst in high commodity prices as the government said the headline inflation rate may not have reached its peak yet and food is expected to become even more expensive, according to the Philippine Statistics Authority (PSA).
To this, the Bangko Sentral ng Pilipinas (BSP) said it is “prepared to take policy actions” to cool inflation. The latest inflation print, however, was within the Central Bank’s forecast for September.
On Wednesday, PSA said inflation averaged 6.9 percent in September. This was faster than the 6.3 percent posted in August 2022 and 4.2 percent posted in September 2021.
The PSA September data is the highest since October 2018 when inflation was also at 6.9 percent. Prior to this, the highest inflation was in December 2008, at 7.8 percent.
“The risk of future inflation, in October, November, and December, would really come from food,” National Statistician Claire Dennis S. Mapa said in a briefing on Wednesday.
Mapa said food is becoming expensive and that nationwide, food inflation averaged 7.7 percent.
At least three regions have already exhibited double-digit increases in food inflation: Region 8 or Eastern Visayas which recorded a food inflation of 10.4 percent; Region 9 or the Zamboanga Peninsula, 10.5 percent; and Region 11 or Davao Region, 10.8 percent.
Food inflation, Mapa said, includes raw food which accounts for 35 percent of the Consumer Price Index (CPI) and processed food consumed in restaurants, accounting for 9 percent of the basket.
Increases in the prices of raw food, Mapa said, would also spill over to the cost of processed food, especially those consumed outside the home.
“Upside risks continue to dominate the inflation outlook in the near term. Price pressures could come from the potential impact of higher global non-oil prices, pending petitions for further transport fare hikes, the impact of weather disturbances on prices of food items, as well as the sharp increase in the price of sugar,” BSP said in a statement.
Monetary policy
BSP noted that the September 2022 inflation of 6.9 percent is within the BSP’s forecast range of 6.6 to 7.4 percent. This, it said, is consistent with its assessment of inflation remaining above target over the near term.
These expectations have been the basis for the monetary authority’s decision to raise interest rates for the third time this year. The Monetary Board raised its interest rates by 50 basis points to 4.25 percent. (Full story: https://businessmirror.com.ph/2022/09/23/bsp-raises-rates-for-3rd-month-now-4-25/)
This action, BSP said, aimed to bring inflation and inflation expectations back to the target to ensure the balanced and sustainable growth of the economy in the medium term.
“The BSP is prepared to take further policy actions to bring inflation toward a target-consistent path over the medium term, consistent with its primary objective to promote price stability,” BSP said in a statement.
“[It] also continues to urge timely implementation of non-monetary government interventions to mitigate the impact of persistent supply-side pressures on commodity prices,” it added.
On Wednesday, Deputy Governor Francisco Dakila Jr. reported that BSP increased the offer volume for the TDF to P340 billion from the P280 billion offered last week. Total volume was allocated between the 7-day and 14-day tenors at P200 billion from P170 billion and P140 billion from P110 billion, respectively.
However, BSP said both tenors were undersubscribed with bids reaching 0.85x and 0.97x the respective volume offerings in the 7-day and 14-day TDF. Nonetheless, it noted that total tenders received, amounting to P307.145 billion, were within the lower range of the volume expected by the BSP.
Dakila said the weighted average interest rate (WAIR) for both tenors continued to increase from the rates last week. The WAIR for the 7-day TDF rose by 13.8376 bps to 4.4343 percent as that for the 14-day TDF increased by 14.2920 bps to 4.4857 percent.
The yields accepted in the 7-day TDF shifted higher but narrowed to a range of 4.0500 to 4.7199 percent.
Meanwhile, the 14-day TDF shifted higher and widened to a range of 4.1500 to 4.7500 percent.
“The results of the TDF auction continue to reflect the pass-through of the recent BSP policy rate hike on short-term interest rates. The slight under subscription could be attributed to market participants’ search for higher yields,” Dakila said.
“Nevertheless, financial system liquidity remains ample. Moving forward, the BSP’s monetary operations will remain guided by its assessment of the latest liquidity conditions and market developments,” he added.
Agriculture
THE National Economic and Development Authority (Neda) said agriculture remains a key factor in bringing down commodity prices, particularly food. Food and non-alcoholic beverages account for 37.75 percent of the CPI.
Neda said the government is committed to ensuring sufficient food supply and sustained subsidies to help Filipinos access affordable goods and services as inflation persists due to domestic and global pressures.
“Agriculture has a big role in ensuring steady supply of food for every Filipino family, and accessible and affordable basic goods. That’s why we make sure there’s enough resources for our farmers and fishermen so that supply of rice, corn, meat and fish are stable,” he said, in Filipino. To support the farm sector, Balisacan said the government helping farmers, especially after Typhoon Karding. The Department of Agriculture (DA) has allocated over P709 million worth of assistance and interventions, including the immediate repair of damaged production facilities and seed distribution.
Despite the damage brought by storms, Baliasacan said the government expects a sufficient supply of rice, chicken, highland vegetables, yellow corn, and white corn throughout the year.
‘Complex’ inflation
ASIDE from agriculture support, Neda also emphasized the need to fast-track the distribution of targeted subsidies for low-income households and public utility drivers. “Today’s inflation is far more complex than what we have seen in recent decades. The government and its stakeholders need to collaborate for shared solutions. In the near-term, ensuring sufficient food supply, while assisting the most vulnerable sectors will help us hurdle the current challenges,” Balisacan said.
Neda said the top five contributors to the September inflation are electricity, gas and other fuels; operation of personal transport; meat; fish; and housing rentals.
It is noted, however, that inflation of meat has slowed from 12.8 percent in September 2021 to 9.0 percent in September 2022.
Although fuel prices have been declining recently, they stay elevated, resulting in high input costs, especially for farmers and fisherfolk.
Thus, one government strategy is to provide fuel discounts worth P3,000 to each eligible farmer to alleviate the effects of high fuel prices. As of September 26, 2022, a total of 148,183 accounts for targeted beneficiaries nationwide were created. Of these, 136,988 have been loaded with fuel discounts and 101,743 cards issued to corn farmers and fisherfolk.
In addition, more than 1.5 million eligible rice farmers are entitled to receive P5,000 cash aid to boost their productivity and help cope with the surging prices of fuel and agricultural inputs.
Image credits: Nonie Reyes