Inflation in the Philippines accelerated in October, aligning with market expectations and providing the central bank with the flexibility to continue its easing cycle. Consumer prices increased by 2.3% year-on-year, matching the median forecast from economists surveyed by Bloomberg and falling within the Bangko Sentral ng Pilipinas (BSP) target range of 2% to 2.8% for the month. The rise in food inflation was particularly driven by a rebound in rice prices, reversing a previous downtrend due to base effects.
Despite the uptick in inflation after a slowdown in September, the average inflation rate for the past ten months stands at 3.3%, remaining within the BSP’s target range of 2% to 4%. Core inflation, which excludes volatile food and energy prices, remained stable at 2.4%.
This latest inflation data supports the possibility of further interest rate cuts by the BSP, with another quarter-point reduction anticipated next month. Following the inflation report, the central bank reaffirmed its commitment to a “measured approach” in its easing strategy.
The BSP projected that inflation will trend closer to the lower end of its target in the coming quarters, although it also highlighted potential upside risks over the next two years.
National Economic and Development Authority Secretary Arsenio Balisacan stated separately that the Philippines is on track to keep inflation within its target, although recent weather disturbances present “significant challenges” to food supply chains.
Last month, the Philippine central bank lowered its benchmark interest rate by 25 basis points for the second time this year, bringing it down to 6%, as easing inflation created room for additional cuts. Governor Eli Remolona indicated that the BSP is unlikely to consider half-point cuts unless the country’s economic growth deteriorates more than expected.
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