July inflation pegged at 4%

Inflation likely accelerated in July on more expensive food and utilities, but is expected to stay within the government target of 2-4 percent.

An Inquirer poll of 11 economists yielded an average inflation forecast of 4 percent in July, faster than the previous month’s 3.7 percent print but still lower compared to the 4.7 percent seen last year.

The median projection matches the lower end of the 4 to 4.8 percent forecast of the Bangko Sentral ng Pilipinas (BSP).

READ: Inflation may have overshot 4% in July, says BSP

If realized, inflation would fall within the target range for the eight straight month, bolstering the case for a rate cut.

The Philippine Statistics Authority is set to release inflation data on Aug. 6.

HSBC economist Aris Dacanay, however, penciled in a 4.2- percent inflation forecast for July as he sees higher food prices and logistical costs due to the impact of Supertyphoon “Carina,” which hit the country last month.

He added that despite the recent cut in rice tariff rates, “retail rice prices haven’t fallen just yet as retailers are still finishing their inventories of rice that were previously bought at higher prices.”

Price control

Latest government data showed that the typhoon and the intensified monsoon rains in late July had destroyed P1.21 billion worth of farm products, with the rice sector suffering the most.

Nicholas Antonio Mapa, chief economist at Metropolitan Bank & Trust Co., meanwhile, projected inflation in July at 3.8 percent as he expects reduced risks from El Niño and better supply conditions due to government actions should help control prices.

“The combination of lower rice prices and favorable base effects could push inflation toward the lower end of the central bank’s target range,” Mapa said in a Wealth Insights report.

For Robert Dan Roces, chief economist at Security Bank, inflation for July is a “temporary overshoot” as driven by more expensive electricity prices, agricultural products and fuel. Roces placed his projection at 4.2 percent, but expects the figure to return to target in August due to favorable base effects.

Manila Electric Co. last month increased electricity rates by P2 per kilowatt-hour (kWh) to P11.6012 per kWh.

Meanwhile, Finance Secretary Ralph Recto said that inflation in July was expected to accelerate but will settle within the target.

“Coming from a low base, the inflation will be higher but still within target for the entire year of 2 to 4 percent,” Recto said.