The country’s headline inflation likely steadied in June as cheaper energy prices may have offset the effect of more expensive food goods and a declining peso.
A City Post poll of 10 economists yielded a 3.9 percent median rate for the consumer price index (CPI) in June, near the upper end of the 3.4 percent to 4.2 percent forecast of the Bangko Sentral ng Pilipinas (BSP) for the month.
Once realized, June inflation would be the same as the 3.9 percent headline inflation rate last April and slower than the 5.4 percent print from the same month a year ago.
The Philippine Statistics Authority will publish the official inflation figures for June this Friday.
Moody’s Analytics economist Sarah Tan expects inflation to remain unchanged in June because soaring rice prices over the last few months have “broadly stabilized (…) we’ve passed the peak of the dry spell period.”
“Upward price pressures in June likely came from other agricultural produce besides rice. For example, pechay — a leafy vegetable commonly used in Filipino cuisine — and ginger were reported by authorities to record higher average retail prices in the first half of June, compared with May,” Tan said.
In an email, HSBC economist for ASEAN (Association of Southeast Asian Nations) Aris Dacanay also noted reduced electricity rates in June.
For June, residential consumers of Manila Electric Co. observed a P1.9623 per kilowatt-hour (kWh) savings in their power expenditures. From P11.4139 per kWh in May, this reduced the general rate down to P9.4516 in June.
This follows the Energy Regulatory Commission’s directive to all distribution utilities and electric cooperatives to apply a staggered collection of costs on their purchases from the Wholesale Electricity Spot Market in May.
“Electricity rates in the Philippines fell by around 17% year on year due to an order by energy authorities to stagger the collections distributors would need to cover their wholesale electricity purchases in May, in contrast to a one-time, big-time price adjustment. This represents a big fall in the inflation outlook,” Dacanay said.
Security Bank chief economist Robert Dan Roces projected that the June inflation rate will remain within the central bank’s target since the slower rises in food and transportation expenses are offset by the electricity costs.
“We expect inflation to remain elevated but moderate in July and August, returning to the target range by September. This forecast, based on recent economic trends and policy decisions, suggests a gradual easing of inflationary pressures,” Roces said.
Bank of the Philippine Islands lead economist Emilio “Jun” Neri Jr. said that should inflation stay near the goal over the next several months, this would increase the likelihood of a rate reduction.
Last week, Bangko Sentral ng Pilipinas Governor Eli Remolona, Jr. said the central bank is likely to lower rates by August 15 meeting.
“If the print for both June and July stays close or below 4%, we think the chances of a BSP (rate) cut in August will be pretty high whether the Federal Open Market Committee cuts rates in July or not,” Neri said in a Viber message. (TCSP)
