In September 2024, inflation fell to 1.9%, the lowest rate since May 2020, when it was at 1.6%. This is a big drop from August 2024, with inflation of 3.3%, and a year ago in September 2023, which reached 6.1%.
The average inflation rate since the beginning of the year is now at 3.4%, which is within the government's target range of 2% to 4%. The main reason for this change is the decrease in the price of food and non-alcoholic beverages, which fell from 3.9% in August to 1.4% in September, including transportation costs which fell from 0.2% to -2.4%.
National Statistician Dennis Mapa explained that the decrease was caused by a combination of base effects and the decrease in the price of some products such as vegetables, gasoline, diesel, oil, and fish.
The price of rice, previously a major factor in inflation, also saw a significant decline, resulting in rice inflation falling to 5.7% in September from 14.7% in August, marking its first return to single digits this year. In March 2024, rice inflation reached a peak of 24.4%. The reduction in the price of rice is also partly caused by the reduction of the tariff on imported rice which is gradually affecting the market.
National Economic and Development Authority Secretary Arsenio Balisacan emphasized the need to support local agricultural production through increased funding, along with the benefits of low tariffs.
Inflation decreased in all regions, with the National Capital Region seeing a decrease to 1.7% in September from 2.3% in August, and a notable reduction from 6.1% in September 2023. Western Visayas reported has the highest regional inflation rate of 3.4%, while the Ilocos Region has the lowest at 0.6%. Moreover, inflation for the bottom 30% of low-income families dropped from 4.7% to 2.5%.
Balisacan points out that the continued decline in inflation is likely to increase consumer confidence, prompting higher spending and benefiting low-income families as they can allocate more to basic needs such as education and healthcare.
The Bangko Sentral ng Pilipinas (BSP) expects September inflation to fall between 2% and 2.8%. Factors that contributed to the decline include negative base effects, a stronger peso, and reduced prices of rice, meat, vegetables, and oil. However, the increase in the price of fish, fruit, and electricity can balance this trend.
Finance Secretary Ralph Recto mentioned that the continued decline in inflation may give the central bank an opportunity to further cut rates before the end of the year. He expects the inflation rate for the whole year to be around 3.2%, which will allow the BSP to implement a more aggressive monetary policy to support economic growth and government revenue.
Recto also pointed to the recent U.S. rate cut. Federal Reserve and suggested that the Philippines may follow suit. The BSP already cut the key policy rate by 25 basis points on August 15, the first reduction in nearly four years. The Monetary Board is scheduled to meet again on October 16, with the possibility of another rate cut.
However, Recto warned that external factors, especially conflicts in the Middle East, could weaken the good inflation outlook, especially if it causes an increase in oil prices. "Our biggest challenge is external obstacles, like the situation in the Middle East, which can cause oil prices to rise," he said.
