Falling rice prices, cheaper fuel pull down August inflation

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(FILE PHOTO)

Metro Manila (CNN Philippines, September 5) — Inflation further cooled in August, settling at a three-year low as rice prices plummet.

The Philippine Statistics Authority (PSA) said inflation settled at 1.7 percent last month, down from the 2.4 percent reading in July.

This is even lower than the 1.8 percent median forecast in a CNN Philippines poll, and marks a sharp slowdown from the 6.4 percent pace of price increases tallied in August 2018.

The inflation rate is also the slowest since August 2016.

National Statistician Dennis Mapa said the slowdown came largely due to cheaper food and non-alcoholic drinks, with rice prices falling by 5.2 percent from a year ago. He added that this was the steepest fall in rice prices so far this year.

Rice prices have plunged from a year ago, which was attributed to a supply surge after it removed volume limits for imported rice. This crunched profits of local farmers, who have lamented how cheap they can sell their produce.

READ: Lawmaker suggests special powers as last resort to address steep drop in local rice prices

Corn also saw a sustained price decline to reverse last year's spike.

Inflation was softer in Metro Manila at 1.4 percent, versus a 1.8 percent average in the regions.

Prices have risen by an average of 3 percent from January to August, well within the 2-4 percent target of the Bangko Sentral ng Pilipinas (BSP).

The fourth straight decline in inflation is "excellent news" for BSP Governor Benjamin Diokno, who said that price movements are on track with central bank expectations.

"The Monetary Board will definitely take note of this positive development in its next policy meeting on September 26," Diokno said in a text message.

The Monetary Board will meet again later this month to discuss further adjustments in interest rates, which will follow two reductions worth 50 basis points (bp) so far this year. Diokno has said that one more cut worth 25 bp is on the table until December, which would serve to pull down what banks charge for loans.

For ING Bank Manila senior economist Nicholas Antonio Mapa, steadily easing prices of basic goods would allow policy makers to trim rates this month. Lower borrowing rates would also help boost economic growth, which slumped at 5.5 percent during the first semester.