BPI lead economist Emilio S. Neri Jr. said the projected October inflation rate, up from 7.2 percent in September, would mark the fastest annual increase in consumer prices since February 2023.
Consumer prices are also estimated to have risen 0.6 percent month-on-month in October, suggesting that inflationary pressures remain elevated.
Why it matters
The anticipated acceleration signals that inflation is becoming more widespread, with earlier price increases spilling over into transportation, labor-intensive services and other household expenses.
Unlike the fuel-driven inflation spike in April, the latest increase is being driven by more persistent factors that could keep consumer prices elevated in the coming months.
The outlook suggests that inflation has yet to reach its peak, with November potentially recording an increase exceeding 8 percent if current pressures persist.
October drivers
Food prices provided some relief in October as the southwest monsoon, locally known as Habagat, weakened, easing supply disruptions affecting rice, meat, fish and vegetables.
Fuel price rollbacks also helped moderate transportation costs.
However, these improvements were outweighed by the first full-month impact of public transport fare increases of P1 to P2, which took effect on September 28.
The P60 minimum wage increase in Metro Manila, effective September 26 under Wage Order NCR-28, also raised operating costs for labor-intensive businesses.
While higher wages could support household spending, businesses may pass additional labor expenses on to consumers through higher service prices.
Imported inflation added to the pressure as the peso's depreciation increased the cost of fuel, imported food and dollar-denominated electricity supply contracts.
Manila Electric Co. (Meralco) also raised its overall electricity rate by approximately 2.2 percent in October after two consecutive months of reductions.
November outlook
Inflation could breach 8 percent in November as wage and fare adjustments continue to filter through the economy.
These increases are particularly concerning because they are difficult to reverse and could encourage businesses to adjust prices further.
Core inflation, which excludes selected volatile food and energy items, already reached a three-year high in September, indicating that underlying price pressures are strengthening.
Additional risks include further peso depreciation, higher electricity distribution charges following Meralco's approved rate reset, volatile global oil prices and potential supply disruptions associated with a Super El Niño.
More rate hikes
The inflation outlook strengthens expectations of further monetary tightening by the Bangko Sentral ng Pilipinas (BSP).
The Monetary Board raised its policy rate by 50 basis points to 5.50 percent in October and signaled its readiness to take additional action.
The peso's depreciation, reaching as much as 8.4 percent year-to-date and touching P64.170 against the US dollar, adds urgency to efforts to contain imported inflation.
Further interest rate increases may be necessary to stabilize inflation expectations and prevent price pressures from becoming entrenched.
However, monetary tightening alone may be insufficient.
Improving agricultural productivity, strengthening energy security, accelerating infrastructure projects and pursuing governance reforms would help address supply constraints and reduce the burden on monetary policy. — Ed: Corrie S. Narisma
