Inflation likely eased in June as lower food and fuel prices helped offset higher electricity costs, though consumer price growth probably remained above the central bank’s target, reinforcing expectations that policymakers will keep a tight grip on monetary policy.
Consumer prices likely rose 6.7 percent from a year earlier, according to the median estimate of 12 economists surveyed by the Inquirer. If confirmed, the figure the Philippine Statistics Authority is due to release on July 7 would mark a modest slowdown from May’s 6.8-percent pace and fall within the Bangko Sentral ng Pilipinas’ (BSP) forecast range of 6 percent to 7 percent.
Even so, inflation would remain far above the BSP’s 2-percent to 4-percent target, underscoring the challenge facing policymakers as they weigh persistent price pressures against slowing economic growth.
Domini Velasquez, chief economist at China Banking Corp., said easing tensions in the Middle East pushed fuel prices lower in June, while declines in several food categories helped cushion the impact of higher electricity rates in the Visayas and Mindanao.
“Despite El Niño conditions, rice prices also fell month-on-month for a second straight month, likely reflecting relief from last year’s import ban,” Velasquez said. She expects inflation to have slowed to 6.2 percent.
“Other key food items, including meat, fish, fruits, eggs and sugar also posted declines,” she added.
Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, projected a 6.5-percent inflation rate, citing a sharper slowdown in food prices alongside further easing in transport costs. “The likely deceleration should be due largely to a more pronounced deceleration in food prices and as well as a further cooling in transport inflation, with the risks probably tilted to the downside,” he said.
But economists at Philippine National Bank are penciling in a faster 7-percent inflation for last month, citing the higher prices of electricity and vegetables.
The BSP last month raised its benchmark interest rate by 25 basis points to 4.75 percent, extending its current tightening cycle to a cumulative 50 basis points, as officials sought to contain price pressures fueled by the conflict in the Middle East and the threat of a severe El Niño.
Higher borrowing costs are intended to restrain spending by households and businesses, easing inflationary pressures but also weighing on economic activity. The Philippine economy expanded 2.8 percent in the first quarter, its weakest growth since the postpandemic recovery began, as a major corruption scandal dented confidence while higher global oil prices squeezed consumers and businesses.
Reflecting the more challenging inflation outlook, the BSP now expects inflation to average 6.4 percent this year, up from an earlier forecast of 6.3 percent. Its projection for 2027 was also raised to 4.5 percent from 4.3 percent.
Given persistent inflation and lingering upside risks, Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, said the BSP was likely to retain its tightening bias. He expects June inflation to have reached 6.9 percent, citing “a mix of easing and persistent pressures.”
“A pause in policy easing appears premature at this stage,” Asuncion said.
“We see room for additional policy rate hikes, with the terminal policy rate potentially reaching around 5.5 percent, as the BSP remains focused on anchoring inflation expectations and addressing second-round effects,” he added.
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