July inflation seen dropping to 0.5-1.3%

A DECLINE in rice prices could have pulled inflation to as low as 0.5 percent in July, the Bangko Sentral ng Pilipinas (BSP) said on Thursday.

Consumer price growth was forecast to hit 0.5 to 1.3 percent, below the 1.4 percent recorded in June.

The Philippine Statistics Authority (PSA) is scheduled to release July inflation data on Aug. 5.

A fifth straight sub-2.0 percent outcome — below the BSP’s 2.0- to 4.0-percent target — will likely prompt monetary authorities to again lower key interest rates when they meet on Aug. 28.

“Upward price pressures for the month are likely to be driven by higher meat and vegetable prices partly due to unfavorable weather conditions, increased electricity rates, elevated domestic fuel costs, and the depreciation of the peso,” the central bank said in a statement.

“These price pressures, however, could be partially offset by the continued decline in rice prices,” it added.

“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 decision-making.”

The BSP’s policymaking Monetary Board has this year trimmed key policy rates twice, in April and June, after pausing in February due to uncertainties over the impact of US trade policy.

The benchmark rate currently stands at 5.25 percent and central bank Governor Eli Remolona Jr. has said that two more cuts are likely before the year ends.

Last Tuesday, Remolona said an August reduction was “on the table” given subdued economic growth and improving inflation.

Gross domestic product (GDP) growth was just 5.4 percent in the first quarter, below the 6.0- to 8.0-percent target in effect at that time.

Economic managers later said that 6.0 percent remained achievable but 8.0 percent was out of reach, and in June revised the goal to 5.5-6.5 percent.

Preliminary second-quarter results will be released by the PSA on Aug. 7.

Remolona said that both inflation and GDP results would be considered during the Aug. 28 policy meeting.

April-June growth, he added, will likely be better at “around 5.5 percent.”