The Bangko Sentral ng Pilipinas said inflation rate in June 2024 likely settled within a range of 3.4 percent to 4.2 percent.
“Increases in the prices of agricultural commodities like rice, vegetables, meat and fish, along with the peso depreciation and higher domestic oil prices, are the primary sources of upward price pressures for the month,” the BSP said.
The peso closed at 58.61 against the US dollar Friday, still near the record low.
The BSP said, however, lower electricity rates and fruit prices could contribute to the deceleration in inflation.
“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,” the BSP said.
The BSP on June 27 left the overnight borrowing rate unchanged at 6.5 percent, in line with market expectations.
“The policy rate currently stands at a 17-year high. Concerns over inflation and currency depreciation leave the bank with limited room to ease policy,” Oxford Economics said.
“We expect headline inflation to edge up slightly in June before falling in the following months as the impact of tariff cut on imported rice filters through,” the UK think tank said.
”Given the limited exchange rate passthrough to inflation, we still expect the central bank to cut the policy rate in Q4. That said, risks are tilted to an earlier cut if inflation pressures come under control sooner,” Oxford Economics said.
Oxford Economics said the Philippine peso has been trading near a record low of 59 against the US dollar in June.
“This reflects bearish sentiment following signals from the BSP that rate cuts may begin as early as August and markets discounting fewer rate cuts this year by the US Federal Reserve. Nevertheless, the exchange rate passthrough to inflation has been very limited. As a result, BSP interventions in the FX market to support peso is likely to remain infrequent and occur only when the market is under stress,” it said.
Oxford Economics expects headline inflation to edge up further in June to 4 percent before falling in the following months. The reduction of tariffs for in- and out-quota imported rice set to take effect in July will push down inflation given the staple’s substantial contribution to overall inflation, it said.
“Balancing our FX and inflation outlooks, we still expect the central bank to cut the policy rate in Q4, with the possibility of an earlier cut if inflation pressures come under control sooner,” it said.
