INQUIRER.net FILE PHOTO / Jerome Cristobal
MANILA, Philippines — The country’s inflation rate extended its downtrend in July, easing to 6.2 percent from 6.4 percent as slower transport costs and stable food prices helped temper lingering price pressures.
The latest print was lower than the 6.4-percent median estimate of 14 economists surveyed by the Inquirer, and within the 5.6-percent to 6.6-percent forecast range of the Bangko Sentral ng Pilipinas (BSP).
READ: Poll: Inflation likely stayed at 6.4 pct. in July
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Inflation has now eased for the third straight month after peaking at 7.2 percent in April amid the Middle East conflict. However, average inflation from January to July remained elevated at 5 percent, well above the BSP’s 3-percent target.
“The BSP will continue to monitor recent developments and their potential impact on inflation and growth,” the central bank said. “The BSP is prepared to take further monetary action as needed to ensure that inflation returns close to the 3-percent target.”
According to the Philippine Statistics Authority report on Wednesday, the slowdown was driven mainly by transport inflation, which eased to 11.9 percent in July from 12.8 percent in June. This was due to slower increases in fuel prices, with gasoline inflation decelerating to 34.1 percent from 39.2 percent, while diesel inflation eased to 38.6 percent from 39 percent.
Notably, the moderation came despite successive pump price hikes in July, with cumulative net increases reaching double digits by the end of the month amid renewed tensions between the United States and Iran.
But global oil prices remained below $100 per barrel for most of the period, tempering the pass-through effect on domestic inflation.
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Education services also contributed to the slowdown, with inflation cooling to 1.9 percent from 4 percent. Inflation for tertiary education slowed to 1.8 percent from 3.8 percent, while primary education eased to 1.8 percent from 4.6 percent and secondary education to 1.6 percent from 3.6 percent.
Food inflation, meanwhile, held steady at 5.2 percent. Rice inflation, however, accelerated to 17.1 percent, its highest level in two years, from 15 percent in June.
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Electricity inflation also picked up to 17 percent from 12.3 percent, its fastest pace since March 2023, when it had reached 17.3 percent.
“Although fuel prices and electricity rates increased during the month, these were offset by more stable food prices, favorable base effects and slower price increases in several nonfood items,” said John Paolo Rivera, senior research fellow at the Philippine Institute for Development Studies.
READ: BSP sees inflation holding above target in July
“The result is encouraging rather than surprising. It suggests that inflation is gradually moderating, although core inflation remains elevated enough to indicate that underlying price pressures have not fully dissipated,” Rivera added.
Core inflation, which excludes selected volatile food and energy items, eased to 4.2 percent in July from 4.4 percent in June.
For Chinabank economists, however, it is still too early to conclude that the Philippines has entered a sustained disinflationary phase, citing risks such as higher minimum wages, transport fare hikes and increased taxes on certain products.
“We expect inflation to pick up in the fourth quarter, albeit remaining below the 7.2-percent peak recorded in April, partly due to base effects,” Chinabank said, adding that the BSP may end its rate-hiking cycle at its policy meeting on Aug. 27 “as second-round inflation effects appear to have largely run their course.”
The central bank has raised its benchmark interest rate by a cumulative 50 basis points since April, bringing the key policy rate to 4.75 percent, as officials sought to keep inflation expectations anchored despite slowing economic growth. For now, BSP Governor Eli Remolona Jr. has said there is “little chance” the central bank would resort to aggressive rate increases.
“Expect only a short-lived pause in Philippine disinflation in the near term,” said Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics in London. He expects the BSP to “pause” its tightening campaign this month, especially if the second-quarter growth data due later this week would turn out to be a “big disappointment”.
“Crucially, the post-war resurgence in core inflation appears to have finally peaked,” Chanco added. INQ
