Inflation Preview: Rain and oil drive November prices higher 

(Editors’ note: This article has been updated to reflect a change in Metrobank’s inflation forecast for November to 2.9%, taking into account recent farm-price data. The previous inflation estimate for the month was 3.1%.)

Bad weather stoking costs and global oil-market disruptions could push inflation back to the 3% level in November.

Annual headline inflation in November is seen by Metrobank to accelerate to 2.9% from 2.3% in October, bringing the year-to-date number to 3.3%.

Despite the upside pressure from the string of typhoons and geopolitical tensions, inflation will still remain within the Bangko Sentral ng Pilipinas’ (BSP) target range of 2% to 4% for the rest of the year.

Food basket

Costs of agricultural goods, particularly vegetables, rose month-on-month after an unprecedented series of typhoons hit the country in the past weeks. Rice prices, on the other hand, decreased though on a slower pace compared to the preceding month on lower tariffs, slightly offsetting harvest disruptions.

The spate of typhoons caused billions of pesos worth of damage to agriculture and infrastructure, lessening harvest yields and disrupting farm-goods production, according to the disaster management center. The Department of Science and Technology (DOST) estimates that Typhoon Kristine alone brought at least PHP 6.2 billion worth of agricultural damage nationwide.

Pumping prices

Local pump prices rose in November, as recent events threatened oil supply in the global market.

Output disruptions at an oilfield in Norway and the escalation of the Russia-Ukraine war drove oil prices upward. Still, weak global demand – especially from China — has slightly offset upside pressure. The ceasefire agreement between Israel and Hezbollah this week is also expected to ease oil prices, but impact is yet to be felt in the local space.

Electric shock

Electricity prices also rose in November due to higher power generation and transmission costs, according to distributors Meralco, Visayas Electric and Davao Light.

Charges from Independent Power Producers and Power Supply Agreements both rose largely due to the depreciation of the dollar, according to Meralco. Electricity distribution companies reported price increases in the Wholesale Electricity Spot Market Reserve Market, a venue for trading electricity.

What now?

Persistent upside pressure on inflation could drive the BSP to re-evaluate the pace of its easing cycle.

Still despite the impact of bad weather and geopolitics on prices, we still expect inflation to remain within the BSP’s target band for the full year. BSP Governor Eli Remolona also recently stated that weak economic growth may prompt further rate cuts.

The tandem of goal-consistent inflation and sub-target growth leaves enough room for the BSP to deliver another 25-basis-point (bp) cut in their last meeting in December and deliver an additional 75 bps worth of cuts in 2025 to support growth.

MARIAN MONETTE FLORENDO is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. Her academic background is in Mathematics and Economics. She loves solving puzzles and watching mystery movies.

YOSHITAKA HIRAKAWA is a Research Analyst of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. He holds a Bachelor’s in Management Engineering from Ateneo de Manila University. With a background in data-driven decision making and quantitative methods, he aims to provide meaningful insights. Hungry for adventure, he constantly seeks new sights, sounds and experiences, from cliff jumping to trying new cuisines.