Philippines Inflation Cools in June, But Remains High; BSP Stays Vigilant

MANILA, Philippines — Inflation cooled for the second straight month in June, reaching 6.4 percent, driven by slower price increases in transport and food costs. However, the figure remains significantly above the Bangko Sentral ng Pilipinas (BSP)'s target band of two to four percent. The easing was primarily attributed to a deceleration in the transport index, which grew 12.8 percent in June compared to 16.2 percent in May, partly due to easing Middle East tensions. Food and non-alcoholic beverage inflation also slowed to 5.2 percent from 5.7 percent. National Statistician Dennis Mapa reported the headline inflation of 6.4 percent in June, a decrease from May's 6.8 percent. While this is within the BSP's forecast range of six to seven percent, it is considerably higher than the 1.4 percent recorded in June of the previous year. Slower growth was also observed in other food groups, including fish and other seafood (7.8 percent in June from 8.8 percent) and rice (15 percent from 15.6 percent). For the first semester, inflation averaged 4.8 percent, still above the BSP's target. Economic Planning and Development Secretary Arsenio Balisacan stated that the easing inflation pressures reflect improving global conditions and the impact of government interventions. These include targeted assistance for farmers, fisherfolk, and transport service providers, as well as toll exemptions for vehicles transporting agricultural produce. "If we want stable prices, we need a stable food supply," Balisacan said, highlighting the importance of reducing losses from weather disturbances and other supply disruptions. With the El Niño phenomenon underway and expected to intensify, the government is implementing a P26.13-billion food security action plan to strengthen preparedness, ensure adequate food supply, minimize income losses, and expand access to affordable food. Furthermore, the Philippines and Japan are planning to establish a national strategic petroleum reserve to provide a buffer against geopolitical disruptions and extreme price volatility. Balisacan added, "Our goal is not only to bring inflation down but to keep it low and stable. That requires stronger food production, more efficient supply chains and greater resilience to climate and other shocks." He believes that by strengthening these foundations, Filipino families can plan, save, and prosper with greater confidence. Meanwhile, the BSP signaled its readiness to take further action, including potential interest rate hikes, as inflation is expected to remain above target until 2027. Price pressures are broadening beyond fuel and food, even after the June print settled within the central bank's forecast range. The Monetary Board warned that price pressures remain strong, keeping them on guard ahead of their next policy meeting. "Inflationary pressures remain strong. Global oil and fertilizer prices remain elevated in June and continue to drive domestic fuel and food prices," the BSP stated. "Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations." The BSP's latest projections indicate an elevated inflation path, with average headline inflation likely to stay above the government's two to four percent target band in 2026 and 2027. Inflation is expected to move closer to the three percent midpoint of the target only by 2028. "The BSP continues to monitor recent developments, especially in the international oil market, and shall consider these factors in the next policy meeting," the central bank said. "The Monetary Board will continue to be guided by incoming data and is prepared to take further monetary action as needed to ensure that inflation returns to the three percent target." The BSP raised its benchmark interest rate by 25 basis points for a second straight meeting in June, bringing the key policy rate to 4.75 percent. The central bank has delivered a cumulative 50 basis points in rate increases since April to prevent inflation from becoming entrenched. Citi economists Wei Zheng Kit and Helmi Arman noted that another 25-basis-point increase at the BSP's August policy meeting remains likely, while October could be the first possible window for a pause. "BSP’s concerns over second-round effects on inflation are likely to persist," Citi said, citing record minimum wage hikes starting July, delayed adjustments in electricity and food prices, continued peso weakness due to balance of payments pressures, and El Niño risks. The economists highlighted the record Metro Manila minimum wage increase as the most immediate upside risk to inflation, as regional wage boards are expected to follow the National Capital Region's lead. While this adjustment may offer relief to lower-income households, it could also raise costs for small and medium enterprises and contribute to services inflation. Citi also flagged deferred electricity and food price adjustments as another source of pressure that could keep core inflation elevated well into 2027.