Inflation likely accelerated in September on the back of rising food and fuel costs, though overall price gains are still expected to remain near the lower end of the government’s target band, the Bangko Sentral ng Pilipinas said.
The BSP said September inflation may settle within the 1.5 to 2.3 percent range, faster than August’s 1.5 percent.
If realized at the upper end, it would mark the first time in six months, or since February’s 2.1 percent print, that inflation breaches the two percent level, bringing it back within the BSP’s two to four percent target band.
‘Upward price pressures for the month are likely to arise from higher prices of rice and fish. Elevated domestic fuel costs likewise contributed to the upside price pressures for the month,’ the BSP said in a statement.
These, however, may be partly offset by lower vegetable and meat prices as well as cheaper electricity rates.
‘Going forward, the BSP will continue to monitor evolving domestic and international developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,’ it added.
The Philippine Statistics Authority will release the September inflation data on Oct. 7. This comes ahead of the BSP’s Oct. 9 policy meeting, where investors are watching closely if the Monetary Board will deliver another 25-basis-point rate cut or opt to keep the key rate on hold at five percent.
HSBC ASEAN economist Aris Dacanay said the decision is finely balanced.
‘As the BSP nears the end of its easing cycle, finding the right monetary stance has become an exercise of making small adjustments,’ Dacanay said.
According to Dacanay, food-driven inflation risks should remain a key consideration for policymakers, with supply disruptions from typhoons Nando and Opong expected to exert upward pressure on prices.
He also said that the extension of the government’s 60-day rice import ban by President Marcos could also add to these pressures in the coming months.
At the same time, there is still limited evidence that the economy is losing momentum. The recent depreciation of the peso against the dollar may likewise temper the BSP’s appetite for further easing, as it raises the risk of higher import costs feeding into inflation.
‘That said, we are penciling in a rate hold next week wherein the BSP keeps its policy rate at five percent,’ Dacanay said.
Michael Ricafort, chief economist at Rizal Commercial Banking Corp., placed his own September inflation forecast at 2.1 percent.
Despite the uptick, Ricafort said that the benign outlook still leaves space for easing.
‘Inflation could possibly pick up to two-percent levels for the rest of 2025, but would still average 1.8 percent for the year, thereby supporting future policy rate cuts that would match US Fed rate cuts,’ Ricafort said.
He cautioned, however, that risks remain from volatile global oil prices, storm damage to food supply and peso depreciation.
The central bank’s Monetary Board has already cut rates by a cumulative 150 basis points since August 2024, with BSP Governor Eli Remolona Jr. earlier signaling openness to one more cut before year-end.