Philippines Says Inflation Pressure Still Strong After June Data

Pedestrians walk past Quiapo Church in Manila, the Philippines, on Wednesday, September 04, 2024. Photographer: Geric Cruz/Bloomberg Photo by Geric Cruz /Bloomberg

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(Bloomberg) — Philippine inflation eased for a second month, but the central bank said consumer price pressures remain strong and is prepared to take further monetary action to ensure that it returns to target.

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Inflation stood at 6.4% in June compared with 6.8% in May, the Philippine Statistics Authority said on Tuesday. While that’s below the median estimate of 6.5% in a Bloomberg survey of economists, the number is still more than double the central bank’s 3% goal.

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“The Monetary Board will continue to be guided by incoming data and is prepared to take further monetary action as needed to ensure that inflation returns to the 3% target,” the Bangko Sentral ng Pilipinas said in a statement.

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The peso gained 0.1% against the dollar after the release of the data while the main stock index edged up nearly 1%.

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A slower rate of increase in transport and food prices helped headline inflation ease, National Statistician Dennis Mapa said in a briefing. But core inflation, which excludes some food and energy items, quickened to 4.4%, the highest since December 2023. 

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“Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations,” the BSP said. Average headline inflation is seen staying above the central bank’s target for this year and next, it said. Monetary authorities continue to monitor recent developments, particularly in the international oil market, and will consider them in the next policy meeting in August, it added.

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The central bank has raised its benchmark interest rate by 50 basis points this year in a bid to slow inflation that’s one of the hottest in Southeast Asia. The US-Iran war has driven up domestic fuel prices for the country, which sources nearly all of its oil from the Middle East.

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A further 25-basis point increase is likely at the BSP’s next policy meeting next month, Citigroup economists Wei Zheng Kit and Helmi Arman said in a note. “The July minimum wage hike and associated wage-price spiral risk, deferred electricity and food price pass-throughs, and persistent peso weakness all point to upside inflation risk that will likely be hard for the BSP to ignore,” they said.

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Governor Eli Remolona said last month that another rate hike is possible at the BSP’s next policy meeting, but signaled that monetary authorities aren’t leaning toward a steep rate increase going forward with inflation expectations intact. On Monday, Remolona said the economy can handle another quarter-point hike, while predicting the pace of growth may be more than 3% in the second half of 2026. 

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Mapa said the Middle East conflict continues to impact energy-related items which are “trending down but remain substantial.”

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—With assistance from Manolo Serapio Jr..

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(Adds comments from central bank, officials and economist.)

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