MANILA, Philippines — Inflation picked up for the second consecutive month in March, sending policymakers scrambling for a fix as the continued spike in rice prices remained the biggest contributor to the uptick.
Inflation, as measured by the consumer price index (CPI), bolted 3.7 percent year-on-year in March, beating the February reading of 3.4 percent, the Philippine Statistics Authority reported on Friday.
But the price gains in March were below market expectations of a 3.8-percent inflation rate, which was well within the 3.4 to 4.2 percent forecast range of the Bangko Sentral ng Pilipinas (BSP) for the month.
At the same time, inflation managed to stay within the 2 to 4 percent target band of the central bank for the fourth straight month, although the figure inched closer to the upper limit.
Costlier rice
National Statistician Claire Dennis Mapa told a press conference that rice, a staple food for Filipino households, was mostly responsible for the faster inflation in March. Data showed that rice inflation had soared to a 15-year high of 24.4 percent last month, which Mapa attributed to stubbornly high global prices.
READ: Salceda reminds gov’t anew: Rice is key to battling inflation
Costlier rice, in turn, pushed up the overall food inflation to 5.7 percent, the highest since November 2011. That was expected as the staple grain accounts for nearly 9 percent of the CPI basket used to compute inflation.
Mapa said rice prices would likely accelerate at a “double-digit” pace until July 2024 amid the ongoing El Niño dry spell and due to “base effects”—meaning the next readings would be magnified because they would be compared with the figures from last year, when rice inflation was low.
In a statement, Secretary Arsenio Balisacan of the National Economic and Development Authority said the Marcos administration is still wary of extreme weather conditions that could set off food supply problems, including La Niña.
Higher rates for longer
“The government is closely monitoring weather conditions and their effects on the supply of key commodities, such as food and energy, to protect Filipino households from sudden price increases,” Balisacan said.
Meanwhile, state data showed that the contribution of transport to inflation, which has been close to zero since April 2023, had also expanded to 2.1 percent, from 1.2 percent in February, due to higher oil prices.
Commenting on the March data, BSP Governor Eli Remolona Jr. said inflation could temporarily accelerate above the 2 to 4 percent target range in the next two quarters due to “possible adverse impact of adverse weather conditions to domestic agricultural output and positive base effects.”
Hawkish BSP
“The upside risks to the inflation outlook could emanate from higher transport charges, higher prices of food commodities facing supply constraints, increased electricity rates, higher global oil prices, and implementation of a legislated increase in the minimum wage,” Remolona said.
READ: BSP still ‘hawkish’ but rate cut possible in 2024
When inflation is accelerating, central banks typically stay hawkish—or keep interest rates higher—for a much longer period to avoid sharper increases in prices. Already, the inflation problem has prompted economic officials to temper economic growth goals.
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In a commentary, economists at Bank of the Philippine Islands said the BSP would likely keep interest rates steady at 6.5 percent in the first half of the year. The Monetary Board will meet again on Monday (April 8), to decide on interest rates.
