Inflation Update: Benign prices cast a rate cut in stone 

Annual consumer-price rise quickened in November but remained below the mid-point of the central bank’s target band. With the economy needing support, target-consistent inflation casts a December policy-rate cut in stone.

Key points

• Headline inflation accelerated to 2.5% in November from the 2.3% recorded in the preceding month. It remains muted even with a surge in farm prices following six consecutive storms making landfall.
• Year-to-date inflation clocked in at 3.2% in November, down from the 3.3% as of the preceding month. That’s well within the Bangko Sentral ng Pilipinas’s 2%-4% full year target.
• Core inflation, which excludes volatile food and energy items, slightly accelerated to 2.5% from the preceding month’s 2.4%.

What now?

• Full-year inflation will likely settle within BSP’s target this year even with supply-side shocks brought by typhoons and geopolitical tensions. It will remain target-consistent until 2026.
• The lower-than-expected economic growth in the third quarter provides more reason for the BSP to deliver another policy-rate cut to further maintain momentum in consumption and investment growth.
• Metrobank Research maintains its forecast of another 25 basis-point rate reduction this month, bringing down the key rate to 5.75% by end-2024.

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