BPI urges prudence on rate cuts as PH inflation expected to go up in October

Inflation in the Philippines likely climbed to 2.5 percent year-on-year in October, up 0.4 percent from the previous month as fading base effects, bad weather, and currency depreciation pushed food and fuel prices higher, according to Bank of the Philippine Islands.

“Despite this anticipated uptick, we expect inflation to remain manageable in the next 12 months, barring new supply shocks. Upside risks to this outlook include the possibility of La Niña and spread of African Swine Fever,” BPI said. 

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With inflation under control, the BSP might consider a rate cut in December, though outside factors could impact this. 

Peso depreciation reflects market worries over the US Federal Reserve’s rate policy, especially if it pauses cuts. 

“The recent volatility in the markets highlights the need for prudence when it comes to rate cuts,” BPI said. 

“While inflation forecasts allow room for a cut, aggressive action may not be prudent in the current climate. Global and domestic supply shocks can alter the outlook for inflation quickly, making a cautious approach to rate cuts more suitable to maintain stability,” it added.