DOF Economic Bulletin on September 2019 Inflation

Inflation further moderated in September to 0.9%, the lowest since February 2016. This brings average inflation rate for the first three quarters to 2.8%.

The deceleration in price is accounted for by both food and non-food items. In particular, rice and vegetable prices continued to drop. Likewise, meat and fish inflation slowed down due to base effects.

Non-food inflation is also tempered by the downward adjustment in electricity rates and the 0.13% YOY drop in Dubai crude petroleum price from US$62 in September last year to US$53/barrel.

For the rest of the year, assuming month-on-month price growth of at most 0.2% as in September, monthly inflation will be likely still below 1% in October before making upward corrections in the final two months.

DOF View

The continuing drop in inflation has given economic authorities policy room to loosen liquidity, enabling a cut the policy rate by another 25bps. This plus a strong fiscal position coupled with efficient implementation of the catch-up spending program will, boost economic growth in the last quarter of the year.