September Year-on-Year Inflation Hits 6.7 Percent

Headline inflation rose in September to 6.7 percent year-on-year from 6.4 percent in the previous month, according to the Bangko Sentral ng Pilipinas (BSP). The year-to-date average of 5 percent is above the government’s announced inflation target range of 3 percent ±1 percentage point for 2018.

By contrast, core inflation—which excludes selected volatile food and energy items to measure underlying price pressures—eased to 4.7 percent in September from 4.8 percent in the previous month. Likewise, month-on-month seasonally-adjusted headline inflation slowed down to 0.8 percent in September from 0.9 percent in August.

Inflation in September continued to be driven by supply-side factors as food prices remained elevated. Rice inflation rose to double-digit rates in September due to tightness in domestic supply amid the ongoing lean season and weather-related disruptions. Likewise, inflation for food commodities such as meat, fish, and vegetables also increased during the month. On the other hand, non-food inflation slowed down for the second consecutive month as electricity rates declined due to lower generation and transmission charges. At the same time, inflation for education remained negative in September following the implementation of the free tuition program of the government for the public tertiary level.

The latest inflation reading is in line with the BSP’s assessment of future inflation path, which suggests that, in the absence of further shocks, inflation may have peaked in the third quarter of 2018, and is expected to decelerate in 2019 and 2020. Nevertheless, the BSP remains vigilant in assessing evolving inflationary conditions in order to ensure that the monetary policy stance remains consistent with its price stability mandate. At the same time, the BSP continues to support the various non-monetary interventions of the National Government that will further mitigate the impact of supply-side factors on consumer prices.