Philippine inflation at near 6-year low, paves way for rate cuts
FILE PHOTO: People walk along a street market in Quiapo, in Manila, Philippines, July 11, 2023. REUTERS/Eloisa Lopez/File Photo
MANILA :Philippine consumer prices rose at their slowest pace in nearly six years in July as utility costs moderated and food prices declined, the statistics agency said on Tuesday, potentially allowing the central bank to cut interest rates later this year.
The consumer price index rose 0.9 per cent year on year, the lowest rate since October 2019, and below the 1.1 per cent median forecast in a Reuters poll. The July figure was also less than June's 1.4 per cent.
That brought the average rate in the seven-month period to 1.7 per cent, below the central bank's 2.0 per cent to 4.0 per cent target for the year.
Bangko Sentral ng Pilipinas Governor Eli Remolona told Reuters last week the central bank was on track to slash its key interest rate, currently at a two-and-a-half-year low of 5.25 per cent, two more times this year, but the timing will depend on the outlook for growth and inflation.
"On balance, a more accommodative monetary policy stance remains warranted," the central bank said in a statement following the data.
"Emerging risks to inflation from rising geopolitical tensions and external policy uncertainty will require closer monitoring, alongside the continued assessment of the impact of prior monetary policy adjustments," it added.
The July inflation slowdown was partly driven by a faster annual decline in rice prices, which fell 15.9 per cent, compared with June's 14.3 per cent drop. The statistics agency said the downward trend in rice inflation was likely to persist in the next few months.
However, core inflation - which excludes volatile food and energy prices - slightly quickened to 2.3 per cent in July from 2.2 per cent the prior month.
The Philippines, which has lowered its growth forecast for 2025 to 5.5 per cent-6.5 per cent from an earlier forecast of 6 per cent-8 per cent, will announce second quarter GDP data on August 7.
Remolona has expressed optimism the figure would be better than the previous quarter's 5.4 per cent expansion. The central bank will review the direction of interest rates on August 28.
