Philippine inflation fell to 1.9% in September, marking its lowest rate since May 2020. This decline represents a significant drop from 3.3% in August and 6.1% a year prior, reflecting favorable changes in the economic landscape as per the data released by the Philippine Statistics Authority. Year-to-date, the average inflation rate currently stands at 3.4%, indicating a less volatile economic environment overall. The decrease in inflation was primarily driven by food and non-alcoholic beverages.
Prices in this category only rose by 1.4%, a notable reduction from 3.9% in the previous month. Transportation costs showcased a positive trend as well, declining by 2.4% year-on-year, while housing and utility costs also eased, exhibiting a rise of only 3.2%, compared to 3.8% in August. The food inflation specifically saw a reduction to 1.4%, greatly influenced by a dramatic fall in rice prices, which decreased from 14.7% to 5.7%.
However, it is important to note that there was a counteracting surge in fruit and nut prices, which climbed by 11.9%. Such shifts in the food commodity market indicate a complex landscape for consumers as they navigate both declining staple prices and rising rates for other foods. Looking ahead, ING Research anticipates a potential month-on-month increase of 0.7% in the consumer price index (CPI), despite the recent drops in inflation rates.
Predictions suggest that overall inflation may decrease further from August’s 3.3% to 2.9% in the upcoming months. Core inflation, which excludes volatile items such as food and energy, also reflected a decrease from 2.6% in August to 2.4% in September. This significant decline is promising, especially considering that core inflation stood at a much higher rate of 5.9% last year. Given the latest figures, the Bangko Sentral ng Pilipinas may be prompted to consider a 25 basis point rate cut during its upcoming policy review on October 17, as indicated by ING Research.
Such a decision could further influence economic conditions and market sentiments in the Philippines as policymakers react to these evolving inflation dynamics..