Annual inflation in the Philippines accelerated to its slowest pace in more than four years in September, due to a slower rise in food prices and a downward trend in transportation costs, which gives the central bank room to cut interest rates further.
The consumer price index (CPI) increased by 1.9% in September from a year earlier, the smallest increase since May 2020. This increase is also lower than in the previous month (3. 3%) and the 2.5% predicted by a Reuters poll.
With last month’s data, Finance Secretary Ralph Recto said inflation could run around 3.2% this year, within the central bank’s 2% to 4% target.
“This gives the BSP greater room to ease its monetary policy to help the economy grow at a faster pace and support the government in increasing its revenue,” Recto said. in a press release.
The BSP said in a statement on Friday that inflation is expected to trend downward in the coming quarters due to easing food supply pressures and base effects from rising consumer prices. last year.
“The balance of risks to the inflation outlook continues to tilt to the downside for 2024 and 2025 with a slight tilt to the upside for 2026,” the central bank said.
This brought average year-to-date inflation to 3.4%.
Core inflation, which excludes volatile food and energy prices, also slowed to 2.4% in September from 2.6% in August.
The deceleration in food inflation last month was due to a significant slowdown in rice price increases to 5.7% from 14.7% in August, due to base effects and the impact of the reduction of customs duties.
The central bank, which cut its benchmark rate by 25 basis points to 6.25% in August, the first reduction in almost four years, will meet on October 16 to decide the direction of interest rates.
BSP Governor Eli Remolona said two 25 basis point cuts, one in October and the other in December, were possible due to the downward trend in inflation.
