The Philippines is bracing for a possible uptick in core inflation, which could keep the rate sticky through second-round effects even as headline inflation eases in June.
Nomura Global Markets Research projects that core inflation may have quickened to 4.5% last month from 4.1% in May and 2.2% a year ago, with a pass-through effect from still-elevated energy prices.
This would mark the fastest core print in two-and-a-half years and the second straight month that core inflation breached the central bank's 2%-4% target.
Core inflation strips out volatile oil and food prices, allowing policymakers to determine whether prevailing consumer price movements reflect short-lived disruptions or a long-term trend.
Oil prices have eased further in June, with the global oil benchmark price falling by 21%, the largest decline recorded since the onset of the COVID-19 pandemic in March 2020, to below $100 per barrel.
Fuel retailers implemented price rollbacks, with gasoline down by as much as P7.50 per liter and diesel cut by as much as P21.19 per liter.
However, the price of kerosene climbed slightly last month, posting a net increase of P1.98 per liter.
As of the last week of June, a liter of gasoline was sold for P68 to P96.60, while diesel cost P62.60 to P79.99 per liter, and kerosene at P94.60 to P125.50 per liter.
While pump prices have recovered from the over P100-a-liter peak during the war, it still remains above the prewar range of P50 to P60 per liter.
Headline inflation is expected to ease for a second straight month at 6.4% in June from 6.8% in May, helped by a further drop in crude oil prices and stable rice prices.
However, this was slower than the median estimate of 6.6% in a BusinessWorld poll of 18 analysts conducted last week.
Deutsche Bank Research sees inflation at 6.8% as high electricity rates offset the expected relief from softer transport prices during the month.
Electricity rates were hiked by 14.88 centavos per kilowatt-hour (kWh) to P14.4833 per kWh from P14.3345 per kWh, translating to a P30 increase in the overall monthly electricity bill of households consuming 200 kWh.
MUFG Global Markets Research also projects inflation to stay above 6% in June, which would give the BSP reason to remain hawkish.
The central bank has tightened by a total of 50 bps as it increased the key interest rate by 25 bps for a second straight meeting in June, bringing benchmark borrowing costs to 4.75%.
The Monetary Board will have three more rate-setting meetings this year on Aug. 27, Oct. 22, and Dec. 17.
The Philippine Statistics Authority will release the June inflation report on Tuesday (July 7).
