MANILA, Philippines (UPDATED) – Prices of goods continued to rise at a desirable pace, with inflation clocking in at just 0.8% in October.

The Philippine Statistics Authority on Tuesday, November 5, announced the latest inflation figure, which is lower than the 0.9% registered in September and well within analysts’ projections. (READ: What inflation means for you)

The downtrend was primarily due to the annual drop in the index of the heavily weighted food and non-alcoholic beverages, as well as transportation costs.

The increase in rates of housing, water, electricity, gas, and other fuels also slowed down.

Meanwhile, restaurant and miscellaneous goods and services remained the top contributor to inflation during October.

The second commodity group that largely contributed to the overall inflation was alcoholic beverages and tobacco, which posted 16.5% inflation.

Inflation in Metro Manila was higher than the national average at 1.3%, while areas outside the capital further decelerated to 0.7%.

October’s inflation figure is the lowest since May 2016. Year-to-date, inflation now stands at 2.6%.

Low inflation made conditions ripe for the Bangko Sentral ng Pilipinas (BSP) to cut interest rates and trim the amount banks need to hold in their reserves.

BSP Governor Benjamin Diokno is expected to resume easing monetary policy in 2020 to boost the economy amid a global slowdown.

Base effect

While inflation is at its slowest pace in over 3 years, economists have warned of the so-called “base effect” distorting assessments of inflation levels.

This means that prices rose so much in the past two years that recent changes no longer appear that big. (READ: Duterte’s economic team sees stable inflation until his term ends)

Nicholas Mapa, ING Bank Manila’s chief economist, said inflation is likely to go up in the coming months.

“With the base effects from the peak of 2018 fading quickly, we expect inflation to revert to target as early as December,” Mapa said.

Moreover, low inflation may be a welcome development to consumers, but not to rice farmers.

Rice prices, which weigh the heaviest in computing inflation, have drastically dropped. However, farmers have reportedly been selling at a loss under the rice tariffication regime. – Rappler.com