go through Aubrey Rose A. Inosante,,,,, reporter
The Philippine Statistics Bureau reported on Friday that Toutiao inflation increased slightly in June, driven by rising utilities, transportation and education costs.
However, the slowdown in food prices, especially rice, has brought the rise rate in June lower than the target band, leaving more room for this year’s larger space.
Preliminary data from PSA showed that the Consumer Price Index (CPI) rose to 1.4% in June, slightly higher than 1.3% in May, but slowed down from 3.7% in the same month a year ago.
June’s prints were within 1.1% to 1.9% of the Bangladesh Sentral Ng Pilipinas (BSP) in the Business World Poll later last week.
This also marks the fourth consecutive month of inflation settled under the BSP’s 2-4% target range.
Inflation averaged 1.8% in the first six months, down from an average of 3.6% in the first semester of 2024.
That’s much lower than the central bank’s target band, but a 1.6% drop from this year’s inflation baseline forecast.
The core inflation rate excluding volatile prices of food and fuel remained stable at 2.2% in June.
Core inflation averaged 2.2% between January and June, slowing down from 3.4% a year ago.
“Inflation is expected to remain below the target’s low end in 2025, mainly due to the continued decline in rice prices. However, this may be partially offset by the recent surge in oil prices,” the BSP said in a statement.
“It is necessary to adopt a monetary policy stance that is easier to adapt to,” BSP said.
“With the impact of previous monetary policy adjustments continuing to be assessed, emerging risks from geopolitical tensions and external policy uncertainty will require closer monitoring,” BSP said.
BSP Governor Eli M. Remolona said Thursday that central banks need to cut tax rates twice within a year due to benign inflation and increased external risks.
At its June 19 meeting, the central bank cut 25 base points (BP) for the second time this year, with its policy interest rate raising to 5.25%.
This year’s remaining policy meetings are scheduled to be held on October 28, October 9 and December 11.
National statistician Claire Dennis S.
The index rose from 2.3% in May, and 0.1% in the same month last year. This is the fastest growth in nine months or since logging in at 3.3% last September.
Housing, water, electricity, natural gas and other fuels accounted for 63.3% of the June uptrend, PSA said.
The maximum rate of rise under the index is recorded by electricity, starting with 2.8% of prints in May, and a sharp rise in June to a two-year height of 7.4%. This is the largest contributor to the CPI in June, contributing 21.4% or 0.3 percentage points.
Although Manila Electric Co., Ltd.
In June, Mr. Mapa also attributed transportation costs to the source of inflation rates, with a share of 23.8%.
From 2.4% in May, the shipping index slowed down to 1.6%.
Similarly, in June, the rate of gasoline decline fell to 8.9% from -13.2% in May. The diesel fall also fell from 9.3% last month to 7.1% in June.
When Mr Mapa asked about the impact of rising pump prices on inflation caused by the extended Middle East war, Mapa said it could be delayed.
“This will have an impact. In the past few years, especially in 2022-2023 [Ukraine-Russia war]this is very important. But in previous data, it usually lasts two to three months. ” said Mr. Mapa.
The war between Israel and Iran exacerbated global oil prices last month, which later pushed local pump prices but later relaxed after the ceasefire deal.
During the month, the price of gasoline pumps was adjusted to P6.30 per liter, diesel p8.25 p8.25, and the net price of kerosene was P6.50 per liter.
In addition, PSA also said that when education services opened in June, tuition fees for education services rose. The 4.2% revision grew to 5.4% after May’s revision.
Food relieves in June
Weight-weighted food and non-alcoholic beverage index fell to 0.4% from 0.9% in May, with 10.8% printing share in June.
The index’s slowdown accounts for nearly 40% of the country’s goods and services, the slowest in more than five years, or 0.3% since November 2019.
For more than five years, editing for over five years can also be relaxed to 0.1% in June.
The inflation rate for meat and other slaughtered animals was 9.1%, and the clip was faster than 7.9% last month, PSA said.
Pork rose to 13% from 11.9% in May. This is the second contributor to inflation in May, contributing 18%.
Poultry also accelerated from 7.9% in May to 10.4% in June. Fish and other seafood prices also accelerated by 6.2%.
Meanwhile, Rice inflation signed further for the sixth straight month, setting a record 14.3% in June, the biggest drop since 1995.
The PSA reported that rice prices fell further in the second phase of June, with regular rice from P43.32 per kilogram in mid-May P42.53 per kilogram.
“The sharp decline in food inflation over the past year underscores the ongoing progress of our coordinated efforts to promote local production, improve logistics and implement calibrated trade and biosafety measures,” said Arsenio M. Balisacan, Secretary for Economics, Programming and Development (DEPDEV).
Mr Balisacan added: “While the continued relief of food inflation is encouraging, we will remain vigilant to address possible external and domestic risks. Global markets and climate-related damage affecting fuel and electricity costs continue to threaten price stability.”
Meanwhile, inflation in the National Capital Region (NCR) rose to 2.6% from 1.7% in May. Outside the NCR, inflation fell from 1.2% to 1.1%.
The inflation rate of 30% for the lowest-income households was signed to 0.4% in June for the first time in nearly six years. This is the most dramatic drop since the 1.1% fall recorded in October 2019.
This has increased annual annual inflation for the lowest 30% of income households to 0.8%, down from 4.7% in the first semester of 2024.
The lagging effect of war, wage hiking
Mr Mapa said the extended Middle East war-driven pump price increase and the impact of the approved P50 P50 daily minimum wage on inflation will likely be delayed.
“This will have an impact. In the past few years, especially in 2022-2023 [Ukraine-Russia war]this is very important. But in previous data, it usually lasts two to three months. ” said Mr. Mapa.
He added that the increase in wages could affect categories such as personal care, other goods and services, although the full effect will be seen in the next few months.
This could be the same case for the recently approved P50 P50 daily wage hike for Metro Manila minimum wage earners, the highest wage granted by the National Wages and Productivity Commission, Mr Mapa said.
“The validity of the P50 wage in the national capital region is still on July 18. What we are seeing in areas where wages are increasing is that first, we have a lag effect. So it has no immediate impact. But some commodity items have increased.”
More shear space
Aris D. Dacanay, an ASEAN economist at HSBC Global Research, expects inflation to average 1.8%, still within the target range of 2-4%, as non-food-related commodities remain soft due to imports from China.
“However, as the annual inflation rate may be lower than the BSP’s target band, the central bank has enough room to move to a more relaxed stance, deepening its mitigation cycle below 5% if the growth outlook stumbles,” Mr Dacanay said in a research note.
He said their baseline forecasts suggest that BSP could reduce its policy rate to a “neutral rate” of 5%.
The Philippines economy grew 5.4% in the first quarter, down from a 5.9% rate last year. This is also lower than the revised 5.5-6.5% growth target this year.
“Indeed, BSP Governor Remolona mentioned that BSP is preparing to lower its policy interest rate twice this year, which could increase the policy interest rate to 4.75%,” Dacanay said.
“Although not our benchmark scenario, as long as oil prices don’t soar and the currency remains stable, there will be no alienation of the possibility or risk of a slightly deeper relaxation cycle.”
Michael L. Ricafort, chief economist at Rizal Commercial Banking Corp., said the following target inflation could still support possible monetary easing.
He said via Viber information that this would offset President Donald J. Trump’s tariff/trade war to reduce global economic growth, as well as tensions in the Middle East. ”
“We expect inflation to remain low as the continued decline in rice prices may relieve any upward pressure. This supports our belief that BSP has room to lower the 25 bp tax rate twice this year,” Chinabank Research said in a NETTEN.
It also noted that the recently approved wage rate hike will be implemented on July 18, “probably increasing upward pressure.”
“If other regional wage committees implement similar growth rates, we still believe that the overall impact on inflation will be moderate and unlikely to deviate significantly from the track,” Chinabank Research said in a report.
Chinabank Research said over the entire year that inflation is expected to remain under the central bank’s target of 2-4%, “banning any unexpected shocks.”
BSP said inflation could settle 2-4% within the target range for 2026 and 2027.
