Philippines inflation outlook points to October price pressure staying above BSP target

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Philippines inflation outlook October

Highlights

Bangko Sentral ng Pilipinas forecasts October inflation at 7.1%–8.1%, potentially marking the fastest pace since February 2023 and above its 3% target for eight months.
Upward inflation pressure in October is driven by higher domestic fuel prices, electricity rates—up to P15.0615/kWh (+31.91 centavos)—and recently implemented public transport fare hikes.
Rice prices, though up 23.86% year-on-year at P49.79 per kilo, declined 0.42% month-on-month, partly easing overall food inflation amid persistent cost risks.

October forecast signals persistent cost pressures

As reported by BusinessWorld, citing the Bangko Sentral ng Pilipinas, headline inflation is expected to settle between 7.1% and 8.1% in October, with the Philippine Statistics Authority due to release the official reading on Nov. 5. At the top end of that range, inflation would move above the 7.2% level recorded in September and April, which would mark the fastest print in nearly four years since the 8.6% reading in February 2023.

The central bank said upward price pressures are likely to come from higher domestic fuel prices, electricity rates and transport fares. However, it added that lower prices of key agricultural goods, including rice, vegetables, meat and fish, owing to favorable supply conditions, may partly offset those pressures.

Either outcome in the BSP's forecast range would leave inflation above its 3% target for the eighth consecutive month. If the upper end holds, the October reading would also rise sharply from the 1.7% clip recorded a year earlier, while the lower end would imply some easing from September.

Fuel, power and fares drive near-term inflation risks

Local fuel retailers posted mixed price adjustments in October, with gasoline prices falling by as much as P1.11 per liter and diesel by P0.52 per liter, while kerosene rose by up to P4.57 per liter. By end-October, gasoline prices in Metro Manila and nearby areas ranged from P75.10 to P101.10 per liter, diesel from P88 to P102.5 per liter, and kerosene from P116 to P145.34 per liter, all still above prewar levels of about P50 to P60 per liter.

Manila Electric Co. also raised electricity rates by 31.91 centavos per kilowatt-hour to P15.0615 in October from P14.7424 in September, its first increase in two months. The adjustment translates to an added P64 on the monthly bill of households consuming 200 kilowatt-hours, while approved fare increases for public utility vehicles took effect on Sept. 28.

Food prices show some signs of relief on a month-on-month basis. Philippine Statistics Authority data show the average price of local regular milled rice in the first half of October is up 23.86% year on year at P49.79 a kilo but down 0.42% from a month earlier, while well-milled rice is up 18.86% from a year earlier at P56.22 a kilo but down 0.46% from the first half of September.

The BSP said it remains vigilant and will be guided by incoming data on inflation and growth prospects. It also said it continues to assess the impact of the latest developments in the Middle East on the country's inflation and economic outlook, while projecting inflation to average 6.1% by yearend.

Record tanker shipping costs driven by conflict-related risks have become a major new component of global oil pricing, lifting fuel costs and creating spillover pressure on broader consumer prices. Our earlier article noted that attacks and rerouting around key chokepoints such as the Strait of Hormuz and the Red Sea are inflating freight and insurance rates, a dynamic that tends to hit oil-importing countries like the Philippines particularly hard.

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