BSP sees inflation cooling in August

MANILA, Philippines —  Inflation likely eased in August and returned to the target band of the Bangko Sentral ng Pilipinas (BSP) after a quick uptick in July, amid lower prices of oil and other food commodities. Based on its monthly forecast, the BSP said the headline rate could settle within the range of 3.2 and four percent.

This is significantly lower than the July headline rate of 4.4 percent, which was the highest recorded since October 2023.

If realized, this would also mark the return of the inflation print back to the two to four percent target of the BSP after a quick breach in July.

The BSP attributed the downward inflation pressures to lower prices of domestic oil, rice, fish and meat along with the appreciation of the peso against the dollar.

For oil prices in August, a total decrease of P2.70 per liter has been recorded for gasoline, P2.80 per liter for diesel and P3.70 for kerosene.

Since the start of 2024, gasoline prices have been adjusted upward by as much as P6.90 per liter while diesel has been more expensive by P4.05 per liter.

Kerosene, on the other hand, has a net decrease of P4 per liter.

Consumers also started seeing cheaper rice in the market in August following the implementation of Executive Order 62, which lowered the tariff on the imported staple.

Data from the Department of Agriculture’s price monitoring showed that imported commercial rice can be bought for as low as P47 per kilogram from P49 a kilo the month before.

As to the peso, the local currency firmed up for most of August, touching its strongest level against the greenback in about four months last week.

Nonetheless, experts said the peso remains sensitive to depreciation pressures from the expected moves of the US Federal Reserve.

On the other hand, the BSP said higher electricity rates and other agricultural commodities due to unfavorable weather conditions are the primary sources of upward price pressures during the month.

Two weeks ago, the Manila Electric Co. announced that power rates would be higher by P0.0327 per kilowatt-hour, at P11.6339 per kWh.

This is due to higher transmission charge for residential customers amid higher ancillary service charges.

The BSP said it would continue to take a measured approach in ensuring price stability conducive to a balanced and sustainable growth of the economy and employment.

The Philippine Statistics Authority will announce the latest headline inflation on Sept. 5.

The Monetary Board’s next policy meeting is on Oct. 17, wherein it is anticipated to deliver another rate cut as a response to what the Fed is widely expected to do in September.