According to the Bangko Sentral ng Pilipinas (BSP), inflation in the country may have eased to a four-month low in July. The central bank attributes this to lower food prices, which have offset the pressures from costlier fuel and electricity, as well as the peso's weakness.
The BSP projects July 2026 inflation to settle within the range of 5.6% to 6.6%. If realized, this would be above the central bank's 3% target for the fifth straight month, since March when global oil prices surged due to the Middle East war.
Inflation in July would be significantly faster than the 0.9% headline print in July 2025. At the upper end of the forecast, inflation would be faster than the 6.4% in June, and be the quickest pace in two months. At the lower end, this would be the slowest in four months.
The BSP has identified several factors that could contribute to upside price pressures during the month, including elevated domestic petroleum pump prices, higher electricity rates, increasing fish prices, and the depreciation of the peso against the strengthening US dollar.
Renewed hostilities in the Middle East caused global and local oil prices to spike anew, leading to increased pump prices. Domestic fuel retailers raised prices by as much as P11.70 per liter for gasoline, P26.19 per liter for diesel, and P23.89 per liter for kerosene.
The Manila Electric Co. also raised electricity rates by 34.28 centavos per kilowatt-hour (kWh) to P14.8261 per kWh from P14.4833 per kWh in June. This resulted in a P69 increase in the total bill of households consuming 200 kWh monthly.
The peso hit a fresh low this month, driven by renewed inflation fears amid soaring oil prices and safe-haven demand for the dollar. The peso logged a new all-time-low close of P61.847 against the greenback on July 24, erasing the previous record.
BSP Governor Eli M. Remolona, Jr. has stated that the central bank will remain present in the foreign exchange market to smoothen excessive volatility that could be inflationary. However, he emphasized that their intervention remains minimal, as trying to defend the currency against a strong dollar would only lead to lower reserves.
The BSP noted that the continued month-on-month decline in rice prices, as well as cheaper meat, vegetables, and fruits, may have offered some relief during the month. In the second half of July, the price of regular milled rice dipped by 0.74% to P49.30 a kilo, while well-milled rice fell by 0.82% to P55.69 a kilo.
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 expects headline inflation to average 6.4% by yearend, above its 2%-4% tolerance band.
