Philippine inflation reaches 4.8% in September

CPI reached 4.8% YoY in September, a shade lower than what we expected (DBSf:4.9%). Core inflation was also muted at 3.5%. Sequentially, food prices were higher on a seasonally-adjusted basis as adverse weather conditions impacted on crop and fish prices.

The recent typhoon has damaged about 760,000 tons of rough rice (the government had earlier predicted that rice output will reach 6.5 mn tons in 4Q) and this will put some upward pressure on CPI readings in the coming months. Moreover, the country is still heavily dependent on rice imports. With Thailand (a key exporter of rice) planning to bolster rural income through higher rice prices, the next batch of rice imports could be priced considerably higher.

For now, the benign numbers will provide more room for the central bank (BSP) to maintain focus on boosting economic growth. Headline CPI will likely post a spike above 5% in October, but that will mainly be due to a one-off low base effect from last year. We expect the BSP to keep rates on hold for the rest of the year