The Philippine’s headline inflation eased to 4.9% y/y in Oct (from +6.1% in Sep), slower than our estimate (5.5%) and Bloomberg consensus (5.6%). This was largely thanks to a smaller gain in prices of food, fuels and major services components (including passenger transport services, health and restaurants & accommodation services) amid year-ago high base effects.

Although consumer price inflation is expected to continue its downtrend, but it will likely to stay above the central bank’s upper bound target range of 4.0% in the remaining two months of this year. Headline inflation will only return to BSP’s 2.0%-4.0% target range in 1Q24 with risks remaining tilted to the upside. Hence, we maintain our full-year inflation outlook at 6.0% for 2023 (BSP est: 5.8%, 2022: 5.8%) and 3.5% for 2024 (BSP est: 3.5%). Volatile global commodity prices and currency fluctuation are still wildcards to the inflation outlook going into next year, together with potential changes in domestic price policy and adverse weather conditions.