July inflation cools to 4-month low

By Katherine K. Chan, Reporter

PHILIPPINE INFLATION cooled to its slowest pace in four months in July as transport costs eased and food inflation steadied, the Philippine Statistics Authority (PSA) said.

Data from the PSA showed headline inflation slowed to 6.2% from 6.4% in June but quickened from 0.9% a year ago.

July saw the slowest headline inflation in four months or since 4.1% in March.

July also marked the third straight month that inflation eased.

The July print fell within the Bangko Sentral ng Pilipinas’ (BSP) 5.6%-6.6% forecast for the month, but below the 6.4% median estimate in a BusinessWorld poll of 21 economists and analysts.

Year to date, inflation averaged 5%, well above the BSP’s 3% target.

“Headline inflation further slowed to 6.2% in July from 6.4% in June as easing transport costs and improving supply conditions tempered price pressures,” the Department of Economy, Planning, and Development (DEPDev) said in a statement.

Transport inflation slowed to 11.9% in July from 12.8% in June.

In July, pump prices in the domestic retail market climbed by as much as P11.70 per liter for gasoline, P26.19 per liter for diesel, and P23.89 per liter for kerosene.

However, this was tempered by slower inflation in maintenance and repair of personal transport as well as other services related to personal transport equipment, National Statistician Claire Dennis S. Mapa said.

PSA data also showed inflation for other passenger transport by road eased to 5.3% from 5.4% in June.

Still, Mr. Mapa noted that the recent peso depreciation against the greenback renewed price pressures last month, considering the country uses US dollars to purchase its fuel stock.

“Regarding the peso depreciation’s impact on the inflation rate, of course, it directly affects fuel prices,” Mr. Mapa told a press briefing in Filipino. “This is because we purchase fuel in US dollars, while our pump prices are peso denominated. This is where the direct effect is felt, and then of course there are also indirect effects after that.”

As of end-July, the local unit averaged P60.2042 versus the greenback, about 5% or P2.85 weaker than its P57.12 average in the same period last year, according to BSP data.

It plunged to a new historic low of P61.847 per dollar on July 24, breaking its previous record-low finish of P61.75 on July 23.

COSTLIER RICE, ELECTRICITY
Meanwhile, inflation for the heavily weighted food and nonalcoholic beverages index steadied from June at 5.2%, lifting some pressure off the headline print.

This came as “lower meat prices and slower increases in vegetable prices offset sharper rice inflation,” the DEPDev said.

However, the overall inflation remained elevated as electricity and rice inflation accelerated last month.

Rice inflation stood at 17.1% from 15% in June, the fastest pace in two years or since the 20.9% in July 2024.

Mr. Mapa said this was driven by the staple grain’s significant price growth versus a year ago, offsetting the marginal month-on-month decline.

PSA data showed the average price of regular milled rice dipped by 0.9% to P49.55 a kilo in July from about P50 in the previous month but jumped 19.9% from P41.31 a kilo in July 2025.

Meanwhile, a kilo of well-milled rice was sold at P55.41 last month, up by 0.75% from P55 in June and by 16.4% from P47.60 a year ago. Special rice also fell month on month by 0.3% to P63.75 from P63.95 but climbed by 12.2% annually from P56.83.

On the other hand, the Manila Electric Co. hiked electricity rates by 34.28 centavos per kilowatt-hour (kWh) to P14.8261 per kWh in July.

This brought electricity inflation to its fastest pace in over three years, or since March 2023, at 17% from the revised 12.3% in June.

RISKS REMAIN
Mr. Mapa said the latest figure points to a downward trend at the headline level, with inflation peaking in April, but risks remain from high electricity rates and potential increases in food prices.

“This year, (inflation) peaked in April, wherein we recorded 7.2% and then it went down to 6.8% in May, 6.4% in June, and 6.2% in July,” he told a press briefing in mixed English and Filipino. “So, basically the trend that we’re seeing right now is good news that the inflation rate is going down at the headline level. But as I’ve been mentioning, there are risks.”

Core inflation, which strips out volatile food and energy prices, eased to 4.2% from 4.4% in June, but picked up from 2.3% in July 2025.

Mr. Mapa noted that core inflation remains sticky as several nonvolatile commodity groups continue to see price increases.

Meanwhile, PSA data showed inflation in the National Capital Region (NCR) cooled to 4.4% in July from 4.9% in June but quickened from 1.7% last year.

Outside NCR, it eased to 6.7%, slightly slower than 6.8% in the previous month but faster than 0.7% a year earlier.

However, high rice prices weighed heavily on the bottom 30% of income households, with their inflation hitting 8.2% from 8% in June and -0.8% a year ago.

As of July, inflation for the bottom 30% averaged 5.9%.

The food index accounts for over 51% of inflation for the bottom 30%, even higher than its nearly 35% share in headline inflation, making these households more vulnerable to food price swings.

“So, when food prices rise, they are really affected. So, there is one commodity that really drives the inflation rate for the bottom 30% of income households, and that is the price of rice,” Mr. Mapa said, noting that rice holds 18% of the bottom 30% basket, double the 9% share at the headline level.

If rice prices ease in the coming months, inflation for the bottom 30% will likely mirror the downward trend of headline inflation, the national statistician added.

BSP HIKING PATH
The central bank said it will continue to use its monetary policy tools to steer inflation back to its 3% target, with its latest forecast showing the headline clip may hit 6.4% by yearend.

“The BSP will continue to monitor recent developments and their potential impact on inflation and growth,” it said in a statement on Wednesday. “The BSP is prepared to take further monetary action as needed to ensure that inflation returns close to the 3% target.”

Despite inflation softening for three consecutive months, the BSP might cap its tightening cycle with a final hike this month, according to Chinabank Research.

“Despite this extended rebound, we believe the BSP is likely to end its rate-hiking cycle this month, as second-round inflation effects appear to have largely run their course,” it said in a report.

The Monetary Board’s next policy review is on Aug. 27

However, Chinabank noted that it may be “too early” to say that the country is now seeing a sustained disinflation trend, with risks looming from potential wage and transport fare hikes.

“However, risks remain, especially if higher-than-expected minimum wages and transport fares are approved,” it said.

The dual tranche P85 minimum wage hike in Metro Manila was suspended after a Pasig City Regional Trial Court issued a 20-day temporary restraining order on its implementation.

Higher fuel costs have also prompted petitions for fare hikes ranging from P2 to P10, all of which are undergoing government review.

On the other hand, Metropolitan Bank and Trust Co. sees a longer tightening path for the BSP, although noted that future moves will likely remain measured.

“We maintain our expectation for the BSP to carry out measured rate increases,” it said. “The downward trajectory suggests that BSP was correct in holding off on overzealous aggressive rate tightening and we expect the BSP to continue this pace as BSP Governor Remolona balances inflation fighting with support for growth.”

The central bank has so far raised its key policy rate by 50 basis points (bps), with two consecutive 25-bp hikes in April and June which brought the benchmark to 4.75%.

Last month, BSP Governor Eli M. Remolona, Jr. said he sees a “small chance” that the ongoing volatility and emerging threats to inflation would prompt them to deliver a 50-bp hike.

The BSP has said that it will continue to use its monetary policy tools to steer inflation back to its 3% target, with its latest forecast showing the headline clip may hit 6.4% by yearend.