By Katherine K. Chan, A reporter
PHILIPPINE INFLATION is possible dropped for the second straight month to a three-month low in June as below Oil and rice offset higher prices electricity prices, say analysts.
A BusinessWorld a poll of 18 analysts showed an average estimate of 6.6% inflation for June, slower than 6.8% in May but faster than 1.4% last year.
This falls within the Bangko Sentral ng Pilipinas' (BSP) average of 6%-7% for the month.
If the average estimate is true, this will be the second month in a row that inflation has cooled. It would also be the slowest headline in three months or since 4.1% in March.
However, June could be the fourth month in a row that it has breached the bank's 2%-4% target.
The Philippine Statistics Authority will release the inflation report for June on Tuesday (July 7).
Radhika Rao, senior economist at DBS Group Research, said the headline rate could fall to 6.6% amid lower global and domestic energy prices and cheaper food staples.
“We expect inflation in the Philippines to slow to 6.6% (year-on-year) in June 2026 from 6.8% in May, but remain above the policy target of 2-4%,” he said. “Price pressures are likely easing due to lower global oil benchmarks (resulting in domestic pump prices) and easing of food (rice, meat, etc.).”
In June, global oil prices fell below the $100-per-barrel level seen at the height of the Middle East war. It fell 21% from 19% in May, marking the biggest monthly decline since the 55% seen in March 2020, according to Reuters.
Local gas stores also reduced pump prices by P7.50 per liter of gasoline and reached P21.19 per liter of diesel, while kerosene prices increased by P1.98 per liter per month.
“However, the pace of disinflation is slowing down significantly: The decrease in May -19.6% (month-to-month) pump price decreased to approximately 5.9% in June, as most of the room to go back may have already been realized,” commented the Bank of the Philippine Islands Lead Economist Emilio S. Neri, Jr.
Prices of rice, along with other staple foods, also continued to decline in June, helping to ease pressure on the weighted food and soft drink index.
“Despite El Niño conditions, rice prices also fell month-on-month for the second month in a row, possibly reflecting relief from last year's import restrictions,” said China Banking Corp.'s Chief Economist. Domini S. Velasquez. Other important foods including meat, fish, fruit, eggs, and sugar are also decreasing.”
A kilo of regular milled rice was priced at P49.67 in the second half of the month, down 2.67% from P51.03 in May but up 16.79% from P42.53 at the same time last year, while finely milled rice was also sold at an average of P56.15 per kilo, about 3% less than 8% last year in 1lier 8 the past. from P49.13.
Meanwhile, the price of special rice decreased by 1.9% for the month to P64.44 per kilo from P65.69 but increased by 10.1% from P58.53 per kilo last year.
OBJECTIVES
Meanwhile, four of the 18 analysts voted for BusinessWorld expect a slightly faster headline clip in June, citing more expensive electricity and vegetables and the effects of higher oil price spreads in recent months.
For Alvin Joseph A. Arogo, chief economist and research head of the Philippine National Bank, inflation may have reached 7% last month, “mainly due to the increase in the prices of electricity and vegetables.”
Last month, Manila Electric Co. increased the total electricity rate by 14.88 centavos per kilowatt-hour (kWh) to P14.4833 kWh from P14.3345 kWh. This was equivalent to a P30 increase in the average monthly electricity bill for households using 200 kWh.
University of Asia and the Pacific economist Marco Antonio C. Agonia said the annual increase in the price of rice and other commodities could keep inflation above the BSP's tolerance level.
“Oil price changes as usual in the Middle East peace talks and low food prices for selected items may have contributed to the slight decline,” he said. “However, the prices of rice and vegetables are higher compared to last year, and the maintenance of facilities and the second roundinflation effects, will likely keep inflation above target again. “
Mr. Agonia projects inflation to reach 6.5% in June.
“Furthermore, the late pass-through effects from previous shocks, including the weakness of the peso and higher import costs, continued to support price pressures on all goods and services,” said Union Bank of the Philippines Chief Economist Ruben Carlo O. Asuncion.
The local unit stayed above the P61-a-dollar mark for two straight months, averaging P61.2513 against the greenback in June. However, it strengthened by 23 centavos to close at P61.36 on June 30 from its close of P61.59 on May 29.
Mr. Asuncion also noted an expected increase in inflation as households become aware, which could keep inflation stuck.
To Ms. Chinabank's Velasquez, it is possible that the key printing has stayed above the central bank's target for the second month in a row.
“Currently, inflation is likely to increase to 4.3%, breaching the BSP's tolerance limit of 4% for the second month,” he said. “This reflects pricing pressure on services, as education costs rise during the back-to-school season.”
FUTURE PRICE RISKS
Meanwhile, BSP Governor Eli M. Remolona, Jr. he said they are monitoring El Niño conditions and its effects.small impacts on consumer prices.
The central bank estimated that inflation reached 6.4% this year, Mr. Remolona previously noted that he has not yet responded to the expected impact of the El Niño event.
He told reporters last week that the upcoming wage hike is creating “significant” downward pressure on inflation but is unlikely to warrant an increase in the policy rate.
The Department of Labor and Employment announced last week a doubling of wages by P85 in Metro Manila, with a P60 increase this month and another P25 increase that will take place in January 2027.
Aris D. Dacanay, senior ASEAN economist at HSBC Global Investment Research, noted that the spillover effects of the energy shock, high fertilizer prices, and the approaching El Niño season could amplify each other and may increase food prices.
“Looking ahead, we expect inflation to pick up significantly in the second half of the year as energy shocks feed into food prices,” he said. “The impact of reduced fertilizer prices on food supply is likely to be felt in the next few months, increasing the potential damage of the El Niño season on global food availability.”
For Miguel Chanco, senior emerging Asia economist at Pantheon Macroeconomics, June's soft inflation may indicate a decline in inflation risks, giving the BSP reason to break its tightening cycle.
“If we are right about another inflation, this should give the Monetary Board more evidence that the biggest jump in inflation since the start of the war is now firmly in the rearview mirror, which may open the door to the end of its slow tightening cycle, which is becoming more expensive when you look at the weak economic situation,” he said.
However, Maybank Investment Bank economist Azril Rosli said last month's inflation expectations will not stop the BSP from tightening to focus on inflation expectations amid emerging price pressures.
“As inflation remains above target and core inflation continues to rise, the BSP is likely to maintain an accommodative monetary policy stance for a longer period to ensure that inflation expectations remain stable,” said Mr. Rosli.
“We continue to expect the policy rate to reach 5% by the end of 2026 and 5.25% by the end of 2027, although future policy decisions will remain data-dependent,” he added.
Last month, the Monetary Board tightened for the second consecutive meeting, raising the benchmark interest rate by 25 basis points to 4.75%.
Mr. Remolona left the door open to re-launch “measured” to mitigate the price effects of the second round of energy shocks.
The Monetary Board has three more rate-setting meetings this year in Aug. 27, Oct. 22, and Dec. 17.
