Inflation this month came in at a slower-than-expected at 3.8%, as the market expected 4.1%. The lower inflation level was primary due to the slower annual increase in the heavily-weighted food and non-alcoholic beverages index.

The decline in prices of basic food items such as rice and corn was due to the observation that supply chains have begun to truly normalize. Thus, affecting general price levels of the said goods.

However, even as price levels continue to decline, it is too early to tell how the BSP will respond to current inflation levels. UnionBank’s Economic Research Unit (ERU) thinks that the BSP will further wait for more signs of inflation “entrenchment” within the 2-4% inflation target range before either cutting reserve requirement ratio (RRR) or cutting interest rates.

Article by Ruben Carlo Asuncion

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