Bangko Sentral ng Pilipinas Governor Benjamin Diokno said Friday inflation in July likely accelerated to 4.3 percent from 4.1 percent in June, on higher prices of food and petroleum products.
The BSP said inflation would settle within a range of 3.9 percent to 4.7 percent, with a midpoint of 4.3 percent in July.
“Higher prices of domestic petroleum products and key food items along with the upward adjustment in Meralco electricity rates and a weaker peso are the main sources of upward price pressures for the month,” Diokno said in a statement.
“Moving forward, the BSP will continue to monitor emerging price developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved,” he said.
The Philippine Statistics Authority earlier said headline inflation slowed down to 4.1 percent in June, after recording an inflation of 4.5 percent for three consecutive months. However, it was higher than 2.5 percent in June 2020.
Inflation averaged 4.4 percent in the first half, over the upper end of the 2021 target range of 2 percent to 4 percent.
The slower pace of inflation in June was traced to the lower annual rate of increase in the transport index at 9.6 percent from 16.5 percent in May 2021.
ING Bank Manila senior economist Nicholas Mapa said that as meat prices stayed stubbornly high and select food items were set to become pricier on the adjustment of suggested retail prices, food items would likely tip the inflation path to the upside in the coming months.
“We now expect inflation to breach the upper end of the BSP target as the peso remains weak and persistent food inflation keeps price pressures elevated,” Mapa said.
“Despite the projected inflation breach, we do not expect BSP to recalibrate rates in the near term with Governor Diokno likely looking past the cost push driven acceleration. Hiking policy rates at a time where GDP is expected to fall below the official target of 6-7 percent will likely derail the fragile growth prospects for the country,” Mapa said.
Mapa expects inflation to remain elevated in the coming months given the weaker currency, elevated energy costs and pricey food items with the BSP’s 4-percent forecast clearly “under threat.”
Inflation averaged 2.6 percent in 2020.