Economy
BPI’s YoY Inflation Forecast at 2.5% For November 2024
In its latest economic outlook, the Bank of the Philippine Islands (BPI), represented by Emilio S. Neri, Jr., Senior Vice President and Lead Economist, projects a slight increase in the year-on-year (YoY) inflation rate for November 2024 to 2.5%, up from 2.3% in October. This anticipated rise is attributed to several key factors, including supply challenges and currency depreciation.
November’s inflation spike is partly driven by supply chain disruptions caused by recent typhoons, which have significantly impacted vegetable prices, showing faster month-on-month increases compared to October. Additionally, the depreciation of the Peso in November has added to the inflationary pressures.
On the other hand, a slower year-on-year increase in rice prices due to base effects and improving supply prospects may have tempered inflation. Stable oil prices in the global markets may have also prevented a sharper monthly increase in consumer prices.
Outlook for the Next Six Months
Looking ahead, BPI forecasts that inflation will remain manageable over the next six months. This outlook is supported by stable commodity prices and a slower increase in rice prices, amid an economic slowdown in major economies like China. However, risks such as weather disturbances and further depreciation of the Peso could potentially push inflation higher.
BSP’s Rate Cut Possibility
A rate cut from the Bangko Sentral ng Pilipinas (BSP) in December remains possible given the favorable inflation outlook. However, the BSP’s decision may also depend on the behavior of the Peso in the coming weeks. The currency has been under pressure recently, reflecting market adjustments to Federal Reserve rate cut expectations driven by the anticipated inflationary impact of Donald Trump’s economic policies and Fed Chair Powell’s comments downplaying the urgency of rate cuts.
The BSP may decide to maintain its rates if the Fed refrains from cutting in their December meeting or if the Peso breaches the 60 level and exhibits intense volatility before their December 19 policy meeting.
