HEADLINE INFLATION could have barely picked up in June as stable food prices helped offset the spike in fuel prices, analysts said.
A BusinessWorld poll of 17 analysts yielded a median estimate of 1.5% for June inflation, accelerating from the 1.3% in May but still below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% goal range.
If realized, this could be the fastest clip in three months or because the 1.8% in March. Nonetheless, it could be slower than the three.7% print in June 2024.
The Bangko Sentral ng Pilipinas (BSP) will release its month-ahead inflation forecast for June on Monday, June 30.
The June inflation data might be released by the Philippine Statistics Authority (PSA) on July 4.
Maybank Investment Banking Group Economics Research gave a June inflation forecast of 1.5%, citing a slower rise in food and power costs.
“Aspects include sustained low inflation in key groups comparable to food and electricity which can offset some upside pressures from the rise in fuel cost within the last two weeks of the month on account of rise in global fuel prices given the escalation within the Middle East conflict,” Maybank said.
Moody’s Analytics economist Sarah Tan, who expects inflation to have settled at 1.4% in June, said inflation within the food basket likely remained stable, “supported by a modest decline in rice prices.”
The PSA reported that rice prices declined further in June with regular milled rice averaging P42.77 per kilo from the P43.32 per kilo in mid-May.
“Our food-price tracker suggests that food inflation fell further — near zero — but this must be offset fully by a short lived rebound in housing and utilities inflation to over 3%,” Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said.
Aris D. Dacanay, an economist for ASEAN at HSBC Global Research, noted that electricity rates in Metro Manila declined by 0.9% month on month in June on account of lower generation charges.
Manila Electric Co. (Meralco) cut the general rate by P0.1076 per kilowatt-hour (kWh) to P12.1552 per kWh in June from P12.2628 per kWh within the previous month. Generation charges fell by 0.9% to P7.3552 per kilowatt-hour (kWh) from May.
“We expect June inflation to settle at 1.6% yoy (12 months on 12 months), up roughly 0.2% from the previous month. Electricity prices in addition to cost of select non-rice food items delivered upside pressure to inflation,” Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., said.
Chinabank Research said inflation likely quickened on account of higher pump prices, in addition to rising costs of meat, vegetables, and education-related expenses at first of the brand new school 12 months.
FUEL PRICE SPIKE
Ms. Tan said the spike in fuel prices triggered by the conflict within the Middle East could have put upward pressure on the utilities basket.
In June, pump price adjustments stood at a net increase of P6.3 a liter for gasoline, P8.25 a liter for diesel and P6.5 a liter for kerosene.
“Retail gas prices surged 3% day-to-day on June 17 as a response to rising tensions between Iran and Israel, only to have barely moderated within the tail-end of the month when tensions de-escalated,” Mr. Dacanay said.
Reuters on Friday reported that oil prices were set for his or her steepest weekly decline since March 2023, because the absence of serious supply disruption from the Iran-Israel conflict saw any risk premium evaporate.
“While global oil prices have eased following the ceasefire between Israel and Iran, the chance of renewed conflict stays and will drive prices higher again. Still, inflationary pressures could also be tempered by declining rice prices,” Chinabank Research said.
ING Philippines said the rise in domestic pump prices “must be temporary” with prices expected to say no in July.
RATE CUT OUTLOOK
Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. said inflation may start accelerating by September as “favorable base from rice will fade by then.”
“Headline prints will likely remain inside BSP goal which could allow them to chop over again before the top of 2025,” Mr. Neri said.
The Monetary Board delivered a second straight 25-basis-point (bp) cut at its June 19 meeting, bringing its policy rate to five.25% amid a benign inflation outlook and slowing economic growth.
BSP Governor Eli M. Remolona, Jr. also signaled they might deliver another 25-bp cut this 12 months.
The BSP slashed its inflation forecast to 1.6% for this 12 months from 2.4%. It also expects inflation to settle at 3.4% for 2026 and three.3% for 2027.
Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco said he expects inflation to be contained for the remainder of the 12 months, along with his full-year forecast at 1.9%.
“Upside risks to our inflation outlook include global oil price shock triggered by resurgence of Israel-Iran conflict. We still expect a manageable inflation environment and one other quarter-point policy rate cut by the BSP before the 12 months ends,” Mr. Taningco said.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines (UnionBank), said he expects inflation to step by step rise to 2% by September and to finish the 12 months at 2.5%.
“We anticipate the BSP will proceed its policy easing cycle, likely delivering a final 25-bp rate cut in October. This move would allow the central bank to evaluate the cumulative impact of its earlier rate adjustments while maintaining a supportive stance for growth,” Mr. Asuncion said.
Ms. Tan said the conflict within the Middle East could lead on to sustained elevated global oil prices, which can mean higher domestic fuel and utility costs.
The Philippines, a net oil importer, is especially vulnerable to global oil prices.
“Should these risks materialize, they might constrain the BSP’s scope for further policy easing, particularly if second-round effects begin to construct. That said, within the absence of persistent supply shocks, inflation should stay inside goal,” Ms. Tan said.
For the complete 12 months, Moody’s inflation forecast stood at 2.2%.
For his part, Mr. Chanco said he sees ample room and an “urgent need” for 2 additional 25-bp rate cuts.
The Monetary Board’s remaining policy meetings this 12 months are scheduled for Aug. 28, Oct. 9, and Dec. 11. — Aubrey Rose A. Inosante