BSP: Inflation May Hit Eight-Month High in July

MANILA, Philippines – The Bangko Sentral ng Pilipinas (BSP) warned on Wednesday that inflation could reach an eight-month high in July, possibly breaching the government’s target. This surge is attributed to rising electricity rates and food prices.

The central bank forecasts inflation, which gauges the rate of price increases for goods and services, to fall within the range of 4.0% to 4.8%. This is an uptick from June’s 3.7% and is comparable to the 4.7% inflation rate in July 2023. If inflation hits 4.8%, it would be the highest since November of the previous year, which recorded 4.1%.

“Higher electricity rates along with the increased prices for agricultural commodities like vegetables, meat, and fruits along with higher domestic oil prices are the primary sources of upward price pressures for the month,” the BSP stated.

The BSP noted that these pressures could be partially mitigated by lower rice and fruit prices and the appreciation of the peso.

Electricity and Food Prices Drive Inflation

In July, the Manila Electric Company (Meralco) increased its rates by P2.1495 per kilowatt-hour (kWh), raising the overall rate for a typical household to P11.6012 per kWh. This hike translates to an increase of around P430 for residential customers consuming 200 kWh.

Rice prices in Metro Manila ranged from P45.00 to P61.00 per kilogram for local commercial rice and from P47.00 to P65.00 per kilogram for imported commercial rice as of July 30. These prices were slightly lower at the start of the month, with local commercial rice priced between P45.00 and P65.00 per kilogram and imported commercial rice between P49.00 and P65.00 per kilogram.

The Philippine peso showed slight appreciation, closing at P58.645:$1 on July 30, compared to P58.65:$1 on July 1.

BSP’s Forward-Looking Approach

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,” the BSP added.