Headline inflation rose in August to 6.4 percent year-on-year, the highest level observed since March 2009, as supply and logistical issues continued to drive price pressures, according to the Bangko Sentral ng Pilipinas (BSP). The year-to-date average of 4.8 percent is above the government’s announced inflation target range of 3.0 percent ±1.0 percentage point for 2018.
Similarly, core inflation—which excludes selected volatile food and energy items to measure underlying price pressures—increased to 4.8 percent in August from 4.5 percent in the previous month. Meanwhile, month-on-month seasonally-adjusted headline inflation went up to 0.8 percent in August from 0.5 percent in July.
August inflation went up as most food items as well as alcoholic beverages and tobacco recorded price increases. Rice inflation increased to 7.1 percent year-on-year in August from 5.0 percent in July due to tighter supply resulting from the ongoing lean season and adverse weather conditions. Recent typhoons also affected the supply of fruits and vegetables while sugar prices rose as continuous rains dampened domestic output. At the same time, higher prices of meat, fish, and seafood also pushed up inflation in August. Meanwhile, non-food inflation eased in August to 4.1 percent from 4.2 percent in July as the upward adjustment in electricity rates due to higher generation charge was offset by the decline in inflation for education as a result of the free-tuition program of the government for the public tertiary level.
The actual inflation print for August 2018 exceeds the high end of the BSP’s forecast. The BSP will be looking more closely at the detailed data to reassess the medium-term inflation path, even as persistent inflation pressures emanating from supply-side factors continue to require non-monetary interventions from the National Government. On the part of the BSP, monetary authorities will consider the information at the September 27 policy meeting of the Monetary Board with increased vigilance against the potential impact of recent developments on inflation expectations. The BSP remains strongly committed to meeting the Government’s inflation target of 2-4 percent.