BSP sees inflation holding above target in July

MANILA, Philippines — Inflation likely remained stubbornly high in July, with elevated fuel and electricity costs and the effects of the peso’s depreciation keeping price pressures well above the Bangko Sentral ng Pilipinas’ (BSP) target.

The central bank said consumer prices likely rose between 5.6 percent and 6.6 percent from a year earlier.

READ: Inflation eases to 6.4% in June

If inflation lands at the upper end of that range, the reading to be released by the Philippine Statistics Authority on Aug. 5 would exceed June’s 6.4-percent pace.

Upside pressures

Even at the lower end of the forecast, inflation would remain well above the BSP’s 3 percent target, underscoring the challenge policymakers face in bringing prices under control.

“Upside price pressures during the month could stem from elevated domestic petroleum pump prices, higher electricity rates, increasing fish prices, and the depreciation of the peso against the strengthening US dollar,” the central bank said.

“These pressures are expected to be mitigated by lower prices of key food commodities, including rice, meat, vegetables and fruits,” it added.

As the Gulf conflict enters its sixth month, renewed fighting has pushed global crude prices back above $100 a barrel, raising costs for oil-importing economies like the Philippines.

The turmoil has also rattled currency markets, sending the peso to a record low of 61.847 against the dollar and heightening the risk of imported inflation. The bearishness intensified when the Trump administration said it would impose tariffs on imports from 60 trading partners, including the Philippines, accusing them of failing to adequately enforce bans on goods produced with forced labor.

Rate hikes

So far, the central bank has raised its benchmark interest rate by a quarter percentage point to 4.75 percent, bringing cumulative increases since April to 50 basis points as officials sought to keep inflation expectations anchored amid mounting external shocks.

READ: Remolona sees ‘little chance’ of aggressive interest rate hikes

Despite these, BSP Governor Eli Remolona Jr. has said there was “little chance” the central bank would respond with aggressive interest rate hikes.

“The BSP will remain vigilant and guided by incoming data, particularly on inflation and growth prospects. It will continue to monitor recent developments in the Middle East for their impact on inflation and economic activity,” the central bank said. INQ