Inflation Update: Philippine inflation expected to ease despite 4.4% spike in July

The Philippines experienced a sharp increase in inflation in July 2024, with the rate climbing to 4.4% year-on-year from 3.7% in June. This uptick, which exceeded market expectations, was primarily driven by higher prices in housing utilities and food items.

However, core inflation, which excludes volatile food and energy prices, actually decreased to 2.9% from 3.1% in June. Despite July’s spike, the year-to-date average inflation of 3.7% remains within the Banko Sentral ng Pilipinas (BSP) target range.

Looking ahead, we anticipate that July’s inflation reading may represent the peak for 2024. Several factors support this outlook, including expected moderation in rice prices due to reduced tariffs, softening oil prices, and weakening domestic demand.

Although the current elevated inflation and strong 2nd quarter GDP figures might compel the BSP to pause at its next meeting, the central bank is expected to adopt a forward-looking approach. We foresee three 25-basis-point rate cuts by year-end, potentially bringing the BSP’s policy rate down to 5.75%. This projection aligns with our maintained 2024 inflation forecast of 3.3%, reflecting confidence in a stable long-term inflation path despite July’s temporary surge.

Download our report below for more details.

INFLATION UPDATE

To peak or not to peak? July inflation popped higher but is set to moderate by August

We may have seen the peak of inflation in July. We maintain our forecast of 3.3% by the end of the year.

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