MANILA: A 25 basis points (bps) interest rate cut next month is still possible despite the projected slight uptick in consumer prices due to the effects of Super Typhoon Carina and enhanced southwest monsoon, an economist said Monday.
“Realistically, there may be some temporary pick up in prices in hard hit areas until logistics normalize, also in view on some damage on agriculture that could lead to some temporary spike in vegetable [and] other produce prices that could lead to some transitory pick up in food prices,” Rizal Commercial Banking Corporation chief economist Michael Ricafort said in a statement.
Last week, Super Typhoon Carina and the enhanced southwest monsoon caused massive flooding in Metro Manila and nearby provinces.
The Department of Agriculture earlier said the damage to the agriculture sector was estimated at PHP696.87 million as of July 28.
However, Ricafort said the prize freeze would temper price increases in areas declared under state of calamity.
Headline inflation already eased
to 3.7 percent in June, from 3.9 percent in May.
Ricafort said there could be a temporary 0.5 percentage point to 1 percent increase in inflation in July to August due to Super Typhoon Carina, similar to the observed uptick during the Typhoon Ulysses in November 2020 and Typhoon Ondoy in September 2009.
“Though [this will be] offset by the effective 20 percent reduction in imported rice prices that could lead to lower local rice prices, which account for about 9 percent of the inflation index,” he said.
“The widely expected -0.25 (bps) local policy rate cut as early as August 15, 2024, or more than 2 weeks from now, remains possible, especially if inflation would stay well within the 2%-4% inflation target, especially in the coming month,” he added.
Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona Jr. earlier said interest rates could be cut by 25 bps as early as August this year.
“On the balance, inflation could still remain within the 2%-4% target for the coming months,” Ricafort said.
Meanwhil
e, Ricafort said remittances from overseas Filipino workers (OFWs) and government spending might increase in the coming months due to the rehabilitation of areas hit by Super Typhoon Carina.
“Interestingly, there could also be some increase in OFW remittances and conversion to pesos, some borrowings, additional spending by businesses and other institutions, and also increased government spending to help finance rehabilitation of homes, equipment, businesses, [and] other facilities, infrastructure, among others, in hard hit areas,” he said.
“Ironically, these would spur additional business and overall economic activities to offset disruptions and resulting damage at the height of the typhoon,” Ricafort added.
Source: Philippines News Agency
