DOF expects higher inflation in July

MANILA, Philippines — Inflation likely rose to a fresh peak in July, the Department of Finance said Friday.

In an economic bulletin, DOF chief economist Gil Beltran said inflation might have hit 5.3 percent in July. If realized, this would exceed June’s 5.2 percent, which was the highest level in at least five years.

According to Beltran, month-on-month inflation likely eased to 1.7 percent in July from the previous month’s 0.6 percent due to decreases in prices of both food and non-food items.

“The only items which deviated from the trend are five items: tobacco, which accelerated to 1.23 percent, housing, utilities and fuels which rose by 0.43 percent on account of the lagged impact of petroleum products on electricity prices, health, which rose by 0.26 percent and two other items which rose slightly,” the DOF official said.

People have blamed soaring prices on the Duterte administration’s tax reform law, which lowers personal income taxes while raising excise levies on fuel and “sin” products, among others. Supply-side factors like higher global oil prices—worsened by the continuing depreciation of the peso—are also pushing up commodity prices.

Year-to-date, inflation averaged 4.3 percent, or above the Bangko Sentral ng Pilipinas’ 2-4 percent target range.

In a bid to fight inflation and strengthen the local currency, the BSP has delivered back-to-back rate hikes this year. But analysts say more monetary policy actions are necessary to temper inflation.

The central bank has admitted it might miss its target as inflation is projected to average 4.5 percent in 2018, amid risks posed by “second-round” pressures from expected higher minimum wages and public transport fares. But policymakers have vowed to put inflation back on target next year.

The BSP likewise expects inflation to peak in the third quarter of 2018, or “earlier” than its previous projection.

The government will release the July inflation data on August 7.