BSP flags supply risks as inflation hits 1.7% in September

The Bangko Sentral ng Pilipinas (BSP) flagged supply-side risks, including tariffs and food prices, as inflation accelerated to a five-month high of 1.7% in September.

Despite the recent uptick, the BSP expects inflation to settle within the target range for the year and remain within the band for 2026 and 2027, with inflation expectations remaining well-anchored.

However, higher rice tariffs and rising global food prices could exert upward pressure on inflation, partly influenced by President Ferdinand "Bongbong" Marcos Jr.'s order for a 60-day ban on rice imports, which has since been extended to the end of the year.

HSBC ASEAN economist Aris Dacanay noted that the extended rice import ban is a major upside risk to inflation that needs monitoring.

Importers have frontloaded their rice orders anticipating the ban, leading to ample supply by end-August, and if local farmers harvested before Typhoon Nando, rice supply may be sufficient to keep prices stable through year end.

The BSP anticipates that higher electricity rates could be offset by subdued global oil prices due to a stable production outlook.

Despite the soft September inflation reading, HSBC expects the BSP to pause its easing cycle this week before resuming rate cuts in December.