Target June inflation gives The Bangkok Sentral NG Pilipinas (BSP) room will continue this year’s easy cycle, but unexpected price shocks and the Fed’s rate path may affect this prospect.
Finance Minister and Monetary Commission member Ralph G. Recto said in a statement Friday that the exceeding expectations of June inflation prints “provides more room for BSPs to further lower policy rates to help us further improve the spending capacity of Filipinos, drive more investment, and grow more economies and enhance growth that globally disagrees.”
Emilio S. Neri, chief economist at the Bank of the Philippines Islands. “As the outlook for inflation remains favorable and recent guidance, another slowdown may be reduced in the coming months,” said the report.
The Philippine Statistics Bureau reported on Friday that inflation fell to 1.4% in June from 1.3% in May.
Still, this was slower in 3.7% of last June and within the forecast range of 1.1% to 1.9% of central banks. This is also just below the median estimate of 1.5% BusinessWorld Poll 17 analysts.
June marks the fourth straight month of inflation settled below BSP’s annual target of 2-4%.
In the first six months, the title inflation rate was 1.8%, slightly higher than the central bank’s baseline forecast of 1.6%.
BSP Governor Eli M. Remolona, Jr. Central banks have room to cut tax rates twice this year amid moderate inflation and weak economic growth, it said Thursday.
On June 19, the Monetary Commission cut 25 benchmark points (BP) for the second time, raising the policy interest rate to 5.25%. It has now lowered the benchmark interest rate by 125 basis points since the relaxation cycle began last August.
This year’s remaining policy meetings are scheduled to be held on October 28, October 9 and December 11.
Mr Neri said the consumer price index is expected to remain below 2% in July and August due to rice prices.
Rice inflation signed for the sixth straight month to 14.3% in June, the biggest drop since 1995. National statistician Claire Dennis S. Marca (Claire Claire Dennis S.
“However, the favorable basic impact may start to disappear before September, and inflation may return to 3% by November. This outlook does not include any supply shocks from the upcoming typhoon season. Inflation may be higher if a strong typhoon hits the agricultural sector.”
According to the Philippine Atmospheric, Geophysical and Astronomical Services Administration, 10 to 14 tropical cyclones are expected to enter the Philippines’ area of responsibility this year.
Mr Neri said that the “big risk” of BSP further alleviating currency is the uncertainty of the Fed’s own reduction cycle.
“It remains uncertain whether the Fed will lower interest rates this year, and U.S. inflation data for the next two months will be crucial to determine the possibility of a cut in September,” he said.
“There is a risk that tariffs are not fully passed to consumers, as many U.S. companies import heavily by April to buffer the impact. If U.S. inflation increases, the Fed may delay slowing down, which could weaken the peso and limit the BSP’s rooms to maneuver.”
President Donald J. Trump demands immediate tax cuts, butfAs inflation risks rise, there is no need to simplify policies unless the job market begins to weaken significantly, according to Reuters.
New inflation data will be released in about two weeks, with federal president Jerome H. Powell saying if inflation does rise due to tariffs, It may start happening this summer.
The Fed last month left its benchmark overnight rate in the range of 4.25%-4.5% since December. The decision has aroused the anger of Mr. Trump, who feels the recent weak inflation rate means central banks should significantly lower their policy interest rates. He asked Mr. Powell to resign.
Powell said he intends to end on May 15 as the chairman term, reiterating last Tuesday the central bank’s plan to “wait and learn more” to increase inflationary expenses before lowering interest rates.
Interest rate futures show traders regain interest with the vision, and financial market bets point to a cut in September, with only two-two downgrades in total, rather than They lowered the three rates earlier.
Miguel Chanco, chief emerging Asian economist at Pantheon macroeconomics, said they expect BSP to cut another 2 yards by the end of the year.
“Our full-year average forecast of 1.8% for this is still appropriate, with a low risk, and we expect the average to rise to the still most despicable 2.6% next year, within the 2 to 4% target range of BSP,” he said.
Citigroup, Inc. said inflation is expected to remain below central bank targets amid slowdown in external and domestic demand in the first quarter of 2026.
It said it expects the Monetary Commission to cut $2.5 billion in comments in August and October. In 2026, the first meeting of policy-making agencies, which may also be held in February.
Citigroup believes that title inflation averages 1.7% this year.
“Our forecast trajectory reflects the year-on-year release of food prices, which mainly reflects the fundamental effects starting in the second half of 2025, even as prices rise in turn,” it said.
“We also expect stable or slightly higher inflation for services like entertainment and education. However, this may increase due to disinfecting utilities and fuel prices, especially after the recent decline in oil prices. The risks may tilt to the adverse side, especially as food inflation continues to decline.”
Mr Neri said that inflation will remain manageable as long as Brent crude oil prices remain below $85 per barrel.
“The recent ceasefire in the Middle East has caused a decline in oil prices, mitigating the impact on inflation.” – Aubrey Rose A. Inosante and Reuters
