Prices of consumer goods and services eased further in July, with headline inflation decelerating to a 16-month low 4.7 percent due mainly to a slowdown the increases of the cost of housing rentals, food, electricity and transport fares.
Core inflation, which excludes certain food and energy items, is also slowed down to 6.8 percent.
The Philippine Statistics Authority said the average headline inflation stood at 6.8 percent while the average for core inflation is 7.6 percent—both outside the 2 percent to 4 percent target range of the Bangko Sentral ng Pilipinas.
But with July headline inflation print actually at the higher end of the BSP’s forecast range of 4.1 percent to 4.9 percent, and the potential inflationary pressure in the coming weeks caused by increases in fuel prices and the supply bottlenecks due to recent floodings it appears unlikely the central bank will lower policy rates anytime soon.
The BSP is scheduled hold its next policy meeting on Aug. 17. It has kept overnight rates steady at 6.25 percent since its pause in March after a series of increases that added 4.25 percentage points to the benchmark interest rate.
Economic Planning Undersecretary and National Statistician Claire Dennis Mapa said July print does suggest inflation may slide to the BSP’s forecast for average inflation of 5.5 percent for this year despite “certain threats” such as food and fuel prices because of recent events. He said rice inflation, for example, rose in July to 4.2 percent from 3.6 percent in June, and accounts for 9 percent of the consumer basket.
President Ferdinand Marcos Jr., who is also acting agriculture secretary, has already signaled a new round of rice importation to increase domestic supply due to the potential adverse effect on harvest of natural disasters, including recent typhoons and the threat of an El Nino event.
For the bottom 30 percent of income households, Mapa said inflation also slowed in July to 5.2 percent from 6.1 percent in June on account deceleration in the increases in the prices of food, housing rental and transport costs.
The average inflation for this poorer segment of household remain high at 7.6 percent.
The BSP said the inflation outturn of 4.7 percent is within the its forecast of 4.1 to 4.9 percent, consistent with the overall assessment that inflation will gradually decelerate back to the target range by 4Q 2023 in the absence of further supply-shocks.
“The balance of risks to the inflation outlook continues to lean towards the upside owing to the potential impact of additional transport fare increases, higher-than-expected minimum wage adjustments in other regions, persistent supply constraints of key food items, El Niño weather conditions, and possible knock-on effects of higher toll rates on prices of key agricultural items,” it said.
The impact of a weaker-than-expected global economic recovery remains the primary downside risk to the outlook, the BSP said.
