BSP expects June inflation at 6-7%

PHILIPPINE INFLATION likely accelerated to as high as 7% in June, as rising electricity rates and higher vegetable prices offset declines in oil and other key food items, the Bangko Sentral ng Pilipinas (BSP) said on Tuesday.

In its month-ahead inflation forecast, the BSP said inflation likely settled at 6% to 7% in June, faster than the 1.4% clip a year ago.

At the upper end of the forecast, June inflation would be the fastest in two months or since the 7.2% print in April.

At the bottom end, inflation would have cooled from the 6.8% print in May, marking the second consecutive month that consumer prices have eased.

June could also mark the fourth month in a row that annual inflation settled above the central bank’s 2%-4% comfort range.

June inflation is scheduled to be released on July 7.

“The decline of domestic oil prices and the lower prices of major food items, such as rice and meat, may temper inflation for the month. However, higher electricity rates and vegetable prices could partly offset these downward price pressures,” the BSP said in a statement.

Fuel prices have started to decline in June with retailers cutting pump prices by up to P9.08 a liter for gasoline, P20.03 per liter for diesel, and P2.24 per liter for kerosene.

At the same time, rice prices fell in June, with the average cost of regular milled rice declining by 1.8% to P50.12 a kilo from the P51.03 a kilo recorded in the May 15 to 17 period, but 17.3% higher than the P42.74 average recorded in the same period a year ago.

The price of well-milled rice also declined by 2.1% month on month to P56.66 a kilo, but was still 14.5% higher than the P49.50 average a year ago.

At the same time, power rates went up in June. Manila Electric Co. raised rates by P0.1488 per kilowatt-hour (kWh), bringing the overall rate to P14.4833 per kWh, citing higher generation charge linked to the peso depreciation.

The peso has also been trading above the P60-a-dollar level in June. It closed at P61.36 against the dollar on June 30, strengthening by 23 centavos from its P61.59 close on May 30.

The central bank said that it now expects inflation to average 6.4% this year and 4.5% next year.

“The BSP will remain vigilant and guided by incoming data, particularly on inflation and growth prospects. It will continue to monitor recent developments in the Middle East for their implications for inflation and economic activity,” it said.

Reyes Tacandong & Co. Senior Adviser Jonathan L. Ravelas said he expects June inflation at around 6.5% amid still-elevated price pressures.

“Food costs remain the biggest driver, especially with ongoing supply constraints, while energy and transport prices continue to feed through to the broader economy. The peso’s weakness is also adding some pressure on imports,” he said.

Mr. Ravelas said inflation is likely to stay above the 2-4% range in the near term, which would make policymakers cautious about easing too quickly.

The BSP raised its policy rate by 25 basis points to 4.75% in June, marking its second rate hike this year. Three more scheduled policy meetings remain in 2026.

However, Mr. Ravelas said he expects gradual relief toward the latter part of the year provided geopolitical concerns subside and as supply conditions improve and global prices stabilize.

“But in the meantime, households and businesses should plan for continued volatility, particularly from weather shocks and global oil movements. The key message is this: Inflation isn’t out of control, but it’s also not fully tamed yet,” he added.

Ser Percival K. Peña-Reyes, a senior research fellow at the Ateneo Center for Economic Research and Development, said faster food inflation likely pushed June inflation to the upper end of the BSP’s 6-7% estimate.

“The balance of evidence suggests that inflation is more likely to ease in the second half of 2026 than to keep accelerating, but the path is likely to be uneven and highly dependent on energy markets,” he said.

“In other words, the baseline is gradual disinflation with significant upside risks, not a return to broad-based inflation,” he added.

In the coming months, Mr. Peña-Reyes said factors that could affect inflation include Brent crude oil prices, shipping conditions through the Strait of Hormuz, core inflation, inflation expectations from consumers and financial markets, and wage growth. — Justine Irish D. Tabile