By Katherine K. Chan, A reporter
PHILIPPINE inflation in the title was lowered for the second month in a row in June by lower transportation and food prices, but the transmission effects pushed down core inflation. the fastest pace in 31 months, i Philippine Statistics Authority (PSA) said.
Based on PSA data released on Tuesday, headline inflation has slowed to 6.4% from 6.8% in May, but acup from 1.4% last year.
June inflation came in below the average forecast of 6.6% over the period BusinessWorld poll of 18 analysts, but within the Bangko Sentral ng Pilipinas’ (BSP) 6%-7% forecast for the month.
This was the slowest inflation in three months or since 4.1% in March.
As of the first half of the year, inflation reached 4.8%, still above the BSP’s ceiling of 4%. The BSP expects headline inflation to be 6.4% by the end of the year.
“Inflation in June as it eased pressure on oil prices and continued government measures to strengthen food supply helped increase prices,” the Ministry of Economy, Planning, and Development said. said in a separate statement, also noting the easing of tensions in the Middle East.
National statistician Claire Dennis S. Mapa said inflation in transport fell to 12.8% in June from 16.2% in May, while food and alcoholic beverages fell to 5.2% from 5.7%.
Local gas stations reduced the price of gasoline by P7.50 per liter and diesel by P21.19 per liter last month. On the other hand, kerosene went up by P1.98 per liter.
This resulted in petrol inflation falling to 39.2% in June from 51.6% in May, while diesel inflation fell to 39% from 58.5%.
Food inflation has moderated low prices for meat and fish like easThe cost of oil has helped boost the country’s fishing industry, the BSP said.
Meat product prices fell at a 4.2% pace in June from a 2.5% drop in the previous month. Inflation of cereals and cereal products decreased to 12.1% from 12.6%, while fish and other seafood decreased to 7.8% from 8.8%.
Rice inflation also eased to 15% in June from 15.6% in May as prices fell month-on-month, the BSP said, due to the arrival of imported goods and temporary pricing during the period.
The price of regular milled rice decreased by 2.67% to P49.67 per kilo in the second half of the month from P51.03 in the same period in May, while fine milled rice was about 3% cheaper at P56.15 per kilo from P57.88 last month.
“However, higher vegetable prices due to limited availability during the off-season have dampened inflation,” the BSP added.
Sticky CORRE INFLATION
Meanwhile, core inflation, which lowers fuel and food prices, bucked the trend as it rose for the sixth consecutive month to 4.4% in June from 4.1% in May and 2.2% last year.
This matched the December 2023 reading and was the fastest pace in 31 months or since 4.7% in November 2023.
In a separate statement, the Philippine central bank said that oil and fertilizer prices continue to eat into fuel and food costs in the Philippines, indicating that “inflationary pressures remain strong.”
“The increase in core inflation reflects the increase in price pressures and second-stage effects, including higher inflation expectations,” the BSP said.
According to Mr. PSA map, rapid price increase in utilities, restaurants and accommodation services, as well as educational services, among others made its base reach the highest level in more than two years.
In June, housing, water, electricity, gas and other inflation increased to 8% from 7.8% in May, mainly due to a 12% drop in electricity inflation from 8.8% last month.
This happened after the Manila Electric Co. raised the electricity rate by 14.88 centavos per kilowatt-hour (kWh) to P14.4833 kWh last month, meaning that households using 200 kWh per month must pay P30 more on their total electricity bills.
Meanwhile, inflation in restaurants and accommodation accelerated to 7% from 6.7% last month, while inflation in educational services rose to 3.9% from 2.9%.
Mr. Mapa said that they will monitor the price movement in the National Capital Region (NCR) regarding the upcoming salary increase in the region this month, as part of the labor force is also taking care of the inflation in the country.
The minimum wage in NCR is expected to increase by P60 on July 19, bringing it to P755 for non-agricultural workers and P718 for agricultural workers and workers in shops, utilities and small manufacturing establishments. The second phase of the wage increase or P25 will take effect in January next year.
PSA data also showed that inflation in the NCR fell to 4.9% in June from 5% in May, but increased from 2.6% last year.
Excluding the NCR, it fell to 6.7% from 7.1% last month, but was faster than 1.1% last year.
For households in the bottom 30% of income, inflation fell to 8% in June from 8.4% in May. However, this was much faster than that -0.4% recorded in June 2025.
BSP TO STAY HWKISH?
The BSP said recent domestic and international developments, especially in the oil market, will guide their decision on their next monetary policy review on August 27.
“The Monetary Board will continue to be guided by incoming data and is willing to take further monetary measures as needed to ensure that inflation returns to the 3% target,” it added.
The BSP has raised its benchmark rate by a full 50 basis points (bps) since April, bringing it to 4.75%.
ING’s Asia-Pacific Regional Head of Research Deepali Bhargava noted that risks to future inflation from recent wage hikes and the upcoming El Niño season give the BSP reason to remain bullish.
“Taken together, fronts of which, the BSP has enough evidence to declare victory.
“Persistent inflation, rising wages and persistent food price risks should keep policymakers focused on ensuring that inflation expectations remain strong, supporting our expectation of a rate hike by the BSP.”
Chinabank Research also sees a third straight BSP rate hike in August as fast-moving inflation shows the impact of the Middle East war on energy prices is “coming into focus.”
“Major inflationary risks remain, which could keep the BSP on the low side,” it added.
Meanwhile, HSBC Global Investment Research ASEAN Senior Economist Aris D. Dacanay expects the BSP to be more hawkish and deliver 75 bps more hikes by the end of 2026.
“Due to the opposite surprise in wage growth, we expect the BSP to remain on a hiking path until 2026 despite inflation being below expectations two months ago,” Mr Dacanay said in a separate report.
“We expect the BSP to raise rates to 5.5% by the end of the year,” he added, noting that the central bank may reverse its approach to reducing borrowing costs in the second half of 2027.
In a separate analysis, Citigroup, Inc. (Citi) said headline inflation and prospects for a gradual economic recovery in the second half of the year indicate weaker inflationary threats in the Philippines, although risks remain.
Citi economists Wei Zheng Kit and Helmi Arman noted that the Philippine economy may recover slightly from the second half of the year until 2028, but with growth that will remain weaker than its performance in recent years.
“The Philippines is likely to experience slower, below-normal growth in the second half of 2026 and 2027-28,” they said. “The recovery will be uneven: Social construction will resume slowly, spending will increase as measured by inflation, and investment will be cautious pending a political decision.”
Citi also noted that the August hike is still possible, only to be paused in October if lower oil prices prompt the BSP to cut its inflation and growth forecasts.
