Inflation Preview: Food and utilities rising on varying paces  

October headline inflation is expected to be slightly below the target range as continued rice deflation offsets moderate upticks in electricity costs.

Metrobank forecasts headline inflation in October at 1.9%.

Shortage to surplus

Rice prices continue to fall steadily, both monthly and annually, amid an oversupply.

In October, the costs of the grain are expected to fall on a slower pace compared to September, although rice inflation will remain deeply negative on a yearly basis.

To curb the oversupply, Agriculture Secretary Francisco Tiu Laurel Jr. has been reiterating that the government is looking to restore the 35% rice tariff. Tariffs on the grain were slashed to 15% in 2024, when the country faced a rice shortage, affecting prices.

Laurel has said that if the tariff hike is not implemented, the government will instead extend its rice import ban until the end of the next harvest in April, with a one-month window for imports in January.

Food basket

Vegetable and fish prices have risen sharply year-on-year in recent months, reflecting the impact of weather disruptions on supply. As of October, prices are still higher than last year’s, although the pace of increase has slightly moderated. This is expected to keep vegetable and fish prices elevated, adding a bit upward pressure on inflation.

Meanwhile, the rise in meat prices continue to slow year-on-year due to strong local poultry production and steady supply of imported pork. Fruit prices are also stable, providing some relief to consumers. Fruit supply was supported by harvests in several regions despite bad weather.

High power

Power rates will be among the largest sources of upward pressure on headline inflation in October, with the three major electricity providers charging higher compared to the same month last year.

Meanwhile, gasoline and diesel prices continue to see mixed movements in October—but still pose upside pressure on headline inflation on a year-on-year basis.

Metrobank’s Take

Headline inflation will continue to tread below target in October despite upside pressure driven by utilities and select food items. Rice price deflation should offset the uptick in inflation from other commodities, keeping headline inflation tempered for now. This provides leeway for the BSP to further lower its key interest rate in the coming meetings.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

MARIA KAILA BALITE is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. She holds a Master’s degree in Applied Economics and also majored in Financial Economics for her Bachelor’s degree, both from De La Salle University Manila. Outside of work, she enjoys watching thriller movies and K-dramas. JAMES NATHAN ANG is an intern in both the Investment Counselor Department and the Research and Market Strategy Department under the Institutional Investors Coverage Division at Metrobank. He is currently completing his Bachelor’s degree in Management of Financial Institutions at De La Salle University and hopes to work in the financial sector after graduation. His interests include exercising and traveling with his loved ones.