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(Bloomberg) — The Philippine central bank is sticking with its more accommodative monetary policy stance after inflation rate in July slipped to the lowest in nearly six years as rice prices fell by a record.
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Consumer prices rose 0.9% year-on-year last month compared with 1.4% in June. It was below the median estimate of 1.1% in a Bloomberg survey and the lowest since October 2019.
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It marked the fifth straight month that inflation was below the Bangko Sentral ng Pilipinas’ 2%-4% target, giving monetary authorities room to cut interest rates further this year. “On balance, a more accommodative monetary policy stance remains warranted,” the BSP said in a statement after the data was released on Tuesday.
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The peso was down 0.1% against the dollar after the inflation data while stocks were steady.
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The central bank said while inflation is expected to trend higher in 2026 and 2027, it will remain firmly within its target range. BSP Governor Eli Remolona last month said a reduction in the benchmark rate is “on the table” at its next policy meeting. The latest cut came in June, bringing the overnight target reverse repurchase rate to 5.25%, the lowest in nearly three years.
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Prices of rice, which comprises around 9% of the consumer price index, dropped by a record 15.9% in July. But core inflation, which excludes some food and energy items, quickened to 2.3% from 2.2% in June.
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An increase in the supply of imported rice after the government slashed tariffs since last year to 15% from 35% had pulled down prices of the national staple. But it’s prompted the Department of Agriculture to push for a temporary halt in rice imports and increase in tariffs to protect local farmers. That could pressure rice prices going forward.
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Read: Top Rice Importer Philippines May Halt Purchases to Help Farmers
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Global uncertainties and a slower-than-expected growth in the Philippine economy in the first quarter support the central bank’s accommodative stance. The government cut its gross domestic product growth target for this year to 5.5%-6.5% amid the external challenges.
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“The combination of low inflation and weaker growth prospects give Bangko Sentral ng Pilipinas scope to continue easing at its next meeting on Aug. 28 – especially if the peso can hold onto year-to-date gains,” said Tamara Mast Henderson, economist at Bloomberg Economics.
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—With assistance from Ditas Lopez.
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(Adds central bank statement, other details throughout.)
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English (US)