Reduced rice prices necessary to achieve inflation target

Despite its uptick in August, headline inflation can still fall within the government's 2 to 4 percent target by the end of the year if rice prices decline, an economist said on Wednesday. "If the rice price ceiling is effective in curbing rice prices and overall inflation, the headline inflation could still ease year-on-year for the coming months due to higher base effects," Rizal Commercial Banking Corporation (RCBC) chief economist Michael Ricafort said in an interview. The Philippine Statistics Authority (PSA) reported on Tuesday that headline inflation accelerated to 5.3 percent in August from 4.7 percent in July. The uptrend was mainly attributed to the higher inflation in food prices, particularly rice and vegetables. Rice inflation alone increased to 8.7 percent in August from 4.2 percent in July 2023. Last week, President Ferdinand R. Marcos Jr. issued Executive Order No. 39, imposing mandated price ceilings on rice in the whole country. Under EO 39, mandated price ceiling for regular milled rice is PHP41 per kilogram, while the mandated price cap for well-milled rice is PHP45 per kg. Ricafort said the inflation target of below 4 percent could still be achieved as early as November and December despite the challenges brought about by higher prices of rice and oil, as well as the effects of higher minimum wages in Metro Manila. "Thus, it is important that rice prices do not go up further in view of the temporary rice price ceilings since September 5, 2023, to prevent headline inflation from rising further since rice prices accounted for nearly 10 percent of the inflation basket," he said. Ricafort said the proposed reduction of the 35 percent import tariffs on rice from other Association of Southeast Asian Nations (ASEAN) members could also help ease rice prices and overall inflation in the country. He said other non-monetary measures which could help ease inflation include the one-year extension of the reduced import tariffs on meat, rice, corn, coal, among others, and measures to improve local supply and lower the prices of food and other agricultural products. Ricafort said headline inflation could settle at 5 percent this month and further decelerate to 3 to 4 percent in the fourth quarter of the year

Source: Philippines News Agency