\u201cFor July inflation, my prediction is 1.2% and the factors remain soft food prices and restrained nonfood prices, particularly in energy despite some recent pump price changes,\u201d Sun Life Investment Management and Trust Corp. economist Patrick M. Ella stated. <\/span><\/p>\nIn July, pump price adjustments reflected a net drop of P1.10 per liter for gasoline and P1.10 per liter for kerosene. Conversely, there was a net increase of P1.20 for diesel.<\/p>\n
Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco stated that the headline rate might have decelerated in July \u201cowing to what should be a decline in food inflation into negative territory, outright.\u201d<\/p>\n
\u201cFood and energy prices are likely to remain subdued, although the effect of lower rice tariffs, which were implemented in late June 2024, will diminish in annual comparisons,\u201d Moody\u2019s Analytics economist Denise Cheok noted.<\/p>\n
Nicholas Antonio T. Mapa, chief economist at Metropolitan Bank & Trust Co., mentioned July is likely to mark the fifth consecutive month of below-target inflation this year as rice deflation continues.<\/p>\n
Rice inflation has been declining over recent months as the government has implemented numerous strategies to control prices of the staple grain. These include reducing tariffs on rice imports, declaring a food security emergency on the commodity, and lowering the maximum suggested retail price (MSRP) for imported rice.<\/p>\n
In June, rice inflation slowed for the sixth consecutive month to a record 14.3%, the largest decline since 1995.<\/p>\n
\u201cFurthermore, the high base effect (given that inflation peaked at 4.4% in July 2024) is anticipated to help maintain the year-on-year figure subdued despite the monthly increase,\u201d Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr. added. <\/span><\/p>\nRizal Commercial Banking Corp. Chief Economist Michael L. Ricafort also highlighted the one-year anniversary of the tariff reduction on rice imports, which were cut to 15% from 35% in July 2024.<\/p>\n
\u201cBase effects likely contributed significantly but retail prices, too, remained manageable month on month,\u201d HSBC economist for ASEAN Aris D. Dacanay mentioned.<\/p>\n
\u201cSofter costs of rice, fruits, and LPG may have also aided in the deceleration, although these may have been offset by higher expenses for fuel, electricity, and other key food commodities such as vegetables, meat, fish, eggs, and cooking oil,\u201d Chinabank Research remarked. <\/span><\/p>\nAnalysts also emphasized the upside risks to the inflation figure for the month.<\/p>\n
\u201cThe increase was primarily fueled by rising oil prices, electricity rates, and select food items such as vegetables, fish, and meat,\u201d Mr. Neri stated.<\/p>\n
Manila Electric Co. (Meralco) raised rates by P0.4883 per kilowatt-hour (kWh) in July, bringing the overall rate for an average household to P12.6435 per kWh from P12.1552 per kWh a month earlier.<\/p>\n
\u201cUpward price pressures were observed in electricity rates and diesel, but we don\u2019t believe these were sufficient to counter the deflationary pressures from rice and gas,\u201d Mr. Dacanay remarked.<\/p>\n
BAD WEATHER
\n<\/b>Meanwhile, several analysts anticipate July inflation to quicken from the previous month as adverse weather hampered economic activity in crucial regions.<\/p>\n
\u201cThe rise is attributed to delayed effects of food and transport expenses, weather-induced supply interruptions from early monsoon and typhoon activity, and seasonal demand associated with school openings and midyear bonuses,\u201d Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, stated.<\/p>\n
The most recent data from the Department of Agriculture indicated damages to the agricultural sector from three consecutive tropical storms and the southwest monsoon have escalated to P3 billion.<\/p>\n
\u201cThe recent spate of typhoons and bad weather may have impacted domestic supply chains especially for food, potentially leading to price surges,\u201d Oikonomia Advisory & Research, Inc. economist Reinielle Matt M. Erece added.<\/p>\n
Mr. Asuncion also pointed out that exchange rate fluctuations influenced import prices.<\/p>\n
The peso depreciated to P58.32 against the dollar at the end of July from its finish of P56.33 at the end of June. The peso\u2019s close at the end of July represented its weakest in nearly six <\/span>months or since its P58.34 close on Feb. 4. <\/span><\/p>\nFURTHER EASING?
\n<\/b>With inflation still beneath the 2-4% target, analysts indicated that the Bangko Sentral ng Pilipinas (BSP) has ample room to persist in its rate-cutting cycle.<\/p>\n
\u201cInflation remains below target and is projected to stay within target over the policy horizon, providing BSP ample latitude to reduce rates and support moderating growth momentum,\u201d Mr. Mapa mentioned.<\/p>\n
Chinabank Research expects the central bank to implement another 25-bp cut at its meeting later this month.<\/p>\n
\u201cWith inflation potentially dropping to its lowest since October 2019 \u2014 and average inflation expected to remain under target this year \u2014 we believe the BSP has the capacity to continue easing monetary policy with a 25-bp rate cut at its August meeting,\u201d it stated.<\/p>\n
The Monetary Board\u2019s next assembly occurs on Aug. 28.<\/p>\n
\u201cWe\u2019re currently anticipating a 25-bp rate cut from the BSP this month, as the opportunity for easing could possibly shrink starting in the fourth quarter, with headline inflation projected to rebound toward the 3% level, and potentially even higher in 2026,\u201d Mr. Neri remarked.<\/p>\n
BSP Governor Eli M. Remolona, Jr. stated that a rate cut remains a possibility at their policy review later this month.<\/p>\n
\u201cThe BSP might proceed with its policy easing with another 25-bp cut in their subsequent meeting. This is as inflation continues to be below the 2% target and gross domestic product (GDP) growth is still expected to be below the desirable 6% growth or above,\u201d Mr. Erece stated.<\/p>\n
Chinabank noted that a weaker-than-anticipated second-quarter GDP figure could further solidify the rationale for a cut.<\/p>\n
Meanwhile, Security Bank Corp. Vice-President and Research Division Head Angelo B. Taningco mentioned that there exists a possibility that the BSP could maintain rates this month.<\/p>\n
\u201cWe still foresee further monetary easing but may not be immediate for this month of August as the recent and anticipated peso depreciation could influence it,\u201d he remarked.<\/p>\n
The central bank could also adopt a cautious stance going forward, analysts remarked.<\/p>\n
\u201cSubsequent actions following a potential August cut are expected to be more measured, with our in-house perspective anticipating further reductions in the fourth quarter as less likely,\u201d Mr. Neri noted.<\/p>\n
He pointed out inflation risks, a prolonged hawkish stance from the Federal Reserve, and significant current account deficits, which could limit the BSP\u2019s flexibility in adjusting monetary policy.<\/p>\n
\u201cA pause in the fourth quarter may be warranted to assist in managing pressure on the local currency,\u201d Mr. Neri added.<\/p>\n
Mr. Ella noted that a rate cut in the fourth quarter is feasible \u201cif growth will surprise on the downside due to trailing impact of global tariffs.\u201d <\/span><\/p>\n\u201cThe BSP will be diligently monitoring potential inflationary pressures arising from geopolitical tensions and tariff-related supply chain disruptions,\u201d Ms. Cheok remarked.<\/p>\n
Mr. Chanco anticipates the Monetary Board to execute at least two cuts before the year concludes.<\/p>\n
Mr. Remolona earlier asserted he is sticking to his prediction of two more rate cuts this year. Following August, the Monetary Board has two remaining meetings slated for October and December.<\/p>\n
\u201cMoving ahead, inflation will likely begin its gradual rise as the favorable base effects from lower rice prices dissipate,\u201d Mr. Dacanay said.<\/p>\n
\u201cNonetheless, with inflation remaining within the lower-end range of the BSP target band, there is room for the BSP to sustain its easing cycle and potentially deepen the cycle further in the remaining five months of the year.\u201d<\/p>\n
\n
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