By Katherine K. Chan, Reporter
PHILIPPINE INFLATION likely eased for a second straight month to a three-month low in June as lower oil and rice prices offset higher electricity rates, analysts said.
A BusinessWorld poll of 18 analysts yielded a median estimate of 6.6% for June inflation, slower than 6.8% in May but faster than 1.4% a 12 months ago.
This falls throughout the Bangko Sentral ng Pilipinas’ (BSP) 6%-7% projection for the month.
If the median estimate holds true, this may be the second month in a row that inflation cooled. It could even be the slowest headline print in three months or for the reason that 4.1% in March.
Nonetheless, June may mark the fourth consecutive month that it breached the central bank’s 2%-4% goal.
The Philippine Statistics Authority will release the June inflation report on Tuesday (July 7).
Radhika Rao, a senior economist at DBS Group Research, said the headline print likely cooled to six.6% amid lower global and domestic energy prices in addition to cheaper key food items.
“We expect Philippines’ inflation to moderate to six.6% (12 months on 12 months) in June 2026 from 6.8% in May, but stay above the 2-4% policy goal,” she said. “Price pressures likely slowed on the back of a decline in global oil benchmarks (consequently domestic pump prices) and easing food (rice, meat, etc.).”
In June, global oil prices eased below the $100-per-barrel level seen in the course of the height of the Middle East war. It dropped by 21% from 19% in May, marking the steepest monthly decline for the reason that 55% seen in March 2020, in keeping with Reuters.
Local fuel retailers also cut pump prices by as much as P7.50 per liter for gasoline and as much as P21.19 per liter for diesel, while kerosene prices posted a net increase of P1.98 per liter in the course of the month.
“Nonetheless, the pace of disinflation is decelerating sharply: May’s outsized -19.6% (month-on-month) pump price decline narrows to an estimated -5.9% in June, as many of the rollback room can have already been realized,” Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. noted.
Rice prices, alongside other key food items, also continued to say no month on month in June, which helped ease pressure from the heavily weighted food and nonalcoholic beverage index.
“Despite El Niño conditions, rice prices also fell month on month for a second straight month, likely reflecting relief from last 12 months’s import ban,” China Banking Corp. Chief Economist Domini S. Velasquez said. “Other key food items, including meat, fish, fruits, eggs, and sugar also posted declines.”
A kilo of normal milled rice averaged P49.67 within the second half of the month, down 2.67% from P51.03 in May but up 16.79% from P42.53 in the identical period last 12 months, while well-milled rice was also sold for a median of P56.15 per kilo, nearly 3% lower than P57.88 within the prior month but 14.29% costlier 12 months on 12 months from P49.13.
Meanwhile, the value of special rice fell by 1.9% month on month to P64.44 a kilo from P65.69 but climbed by 10.1% from P58.53 a kilo a 12 months ago.
OFFSETTING FACTORS
Meanwhile, 4 of the 18 analysts polled by BusinessWorld expect a rather faster headline clip in June, citing costlier electricity and vegetables in addition to the lagged spillover effects of high oil prices in recent months.
For Alvin Joseph A. Arogo, chief economist and research head of the Philippine National Bank, inflation likely hit 7% last month, “mainly attributable to the rise in prices of electricity and vegetables.”
Last month, Manila Electric Co. raised the general electricity rate by 14.88 centavos per kilowatt-hour (kWh) to P14.4833 per kWh from P14.3345 per kWh. This was similar to a P30 increase in the entire monthly electricity bill of households consuming 200 kWh.
University of Asia and the Pacific economist Marco Antonio C. Agonia said the year-on-year uptick in the fee of rice and other commodities could keep inflation past the BSP’s tolerance range.
“Oil price normalization from the productive Middle East peace talks and lower food prices for select items can have contributed to the slight easing,” he said. “Nonetheless, elevated rice and vegetable prices in comparison with a 12 months ago, together with utilities adjustments and second-round inflation effects, will likely keep inflation above goal again.”
Mr. Agonia projects headline inflation to settle at 6.5% in June.
“As well as, lagged pass-through effects from earlier shocks, including peso weakness and elevated import costs, continued to support price pressures across goods and services,” Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion also said.
The local unit remained above the P61-a-dollar mark for 2 straight months, averaging P61.2513 versus the greenback in June. Nonetheless, it strengthened by 23 centavos to shut at P61.36 on June 30 from its P61.59 finish on May 29.
Mr. Asuncion also noted rising inflation expectations as households turn cautious, which could keep core inflation sticky.
For Chinabank’s Ms. Velasquez, the core print can have quickened to remain above the central bank’s goal for the second consecutive month.
“Meanwhile, core inflation likely rose to 4.3%, breaching the BSP’s 4% tolerance ceiling for the second month,” she said. “This reflects price pressures in services, with education costs also picking up amid the back-to-school season.”
LOOMING PRICE RISKS
Meanwhile, BSP Governor Eli M. Remolona, Jr. said they’re monitoring El Niño conditions and its potential effects on consumer prices.
The central bank projected inflation to average 6.4% this 12 months, which Mr. Remolona earlier noted has yet to account for the expected impact of the El Niño event.
He told reporters last week that the upcoming wage hike poses a “significant” inflationary pressure but is unlikely to warrant an outsized policy rate hike.
The Department of Labor and Employment announced last week a dual tranche P85 rise within the minimum wage in Metro Manila, with a P60 hike set this month and the opposite P25 increase to are available in January 2027.
Aris D. Dacanay, senior ASEAN economist at HSBC Global Investment Research, noted that the spillover effects of energy shocks, high fertilizer prices, and the approaching El Niño season could amplify each other and certain drive food prices higher.
“Looking ahead, we expect inflation to speed up further within the second half of the 12 months because the energy shock feeds through into food prices,” he said. “The lagged impact of fertilizer prices on food supply will likely come into the image in the following few months, aggravating the potential damages the El Niño season can have on global food supply.”
For Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, a softer June inflation could signal waning inflation risks, giving the BSP reason to chop its tightening cycle short.
“If we’re right about one other deceleration in headline inflation, then this could give the Monetary Board more evidence that the large jump in inflation for the reason that war began is now firmly within the rear-view mirror, potentially then opening the door for the tip of its mini-tightening cycle, which is becoming more costly given the still-weak state of the economy,” he said.
Nonetheless, Maybank Investment Bank economist Azril Rosli said expectations of slower inflation last month will unlikely deter the BSP from tightening further to anchor inflation expectations amid emerging price pressures.
“With inflation remaining well above goal and core inflation continuing to rise, the BSP is probably going to take care of a higher-for-longer monetary policy stance to make sure inflation expectations remain anchored,” Mr. Rosli said.
“We proceed to expect the policy rate to succeed in 5% by end-2026 and 5.25% by end-2027, although future policy decisions will remain data dependent,” he added.
Last month, the Monetary Board tightened for a second straight meeting, raising the benchmark rate of interest by 25 basis points to 4.75%.
Mr. Remolona has left the door open for further “measured” hikes to temper broadening second-round price effects of the energy shocks.
The Monetary Board has three more rate-setting meetings this 12 months on Aug. 27, Oct. 22, and Dec. 17.