Inflation slid to 4.7% in July, slowest in 15 mos

MANILA  -The country’s inflation rate slid to 4.7 percent in July, the slowest in 15 months or since the 4.9 percent recorded in April 2022, according to the Philippine Statistics Authority.

National Statistician Dennis Mapa said in a press briefing the continued slowdown of headline inflation was mainly due to slower increases in prices of electricity, home rentals, and liquefied petroleum gas; meat, fish and other seafood, and sugar, confectionery and desserts; as well as road transport and airfares.

This was the sixth straight month that inflation, or the rate of increase in the prices of goods and services that households commonly buy, decelerated.

The July readout also came in below the private-sector analysts’ median estimate—or consensus forecast—of 4.9 percent but within the forecast range for the month of the Bangko Sentral ng Pilipinas (BSP), which was 4.1 percent to 4.9 percent.

“We are ‘over the hump’,” Finance Secretary Benjamin Diokno said in a statement.

However, the July number puts the average since January at 6.8 percent, which is still much higher than the BSP’s target full-year average of within 2 percent to 4 percent.

The BSP expects the monthly readout to ease into the target band toward the end of the year, and likely even go below the lower-end range in early 2024.

Thus, while Filipino households and businesses appear to have passed the hurdle of high inflation, they are not yet in the clear in terms of enduring high-interest rates because factors that threaten to hamper sufficient production of goods, particularly foodstuffs, continue to prevail.

In an interview with CNN on Thursday night, before the Philippine Statistics Authority announced the official data, BSP Governor Eli Remolona Jr. said  the central bank is not ready to cut its benchmark policy rate, which is currently at 6.25 percent.

“We’re not out of the woods yet,” Remolona said. “Because of supply-side factors, we are continuing to watch the [inflation] data and we are gonna be ready to raise [the policy rate] if necessary as soon as Aug. 17 (during the next meeting of the Monetary Board or MB).”

The BSP chief, who is also MB chair, acknowledged that inflation rates have been coming down, but also noted that upside risks to inflation expectation—meaning that inflation readouts in the coming months could turn out higher than forecast—continue to prevail.

Remolona cited as an example the possible impact of El Niño on food production, not just in the Philippines but also in countries that are sources of food imports.

“If the supply shocks are large enough and they are not compensated by weaker demand (for goods and services), then, yes, we will have to raise the policy rate again,” he added.

Still, the BSP said in a statement that the July results were consistent with their overall assessment that inflation will gradually ease back to the target range by the fourth quarter “in the absence of further supply shocks.”

Aside from supply factors, upside risks were also attributed to the potential impact of additional transport fare increases, higher-than-expected minimum wage adjustments in other regions that have not yet adjusted, and possible knock-on effects of higher toll rates on prices of key agricultural items. INQ