By Katherine K. Chan, Reporter
PHILIPPINE headline inflation eased for a second straight month in June on lower transport and food prices, but pass-through effects pushed core inflation to its fastest pace in 31 months, the Philippine Statistics Authority (PSA) said.
Based on PSA data released on Tuesday, headline inflation slowed to 6.4% from 6.8% in May, but accelerated from 1.4% a year ago.
The June inflation print came in below the 6.6% median forecast in a BusinessWorld poll of 18 analysts, but within the Bangko Sentral ng Pilipinas’ (BSP) 6%-7% projection for the month.
This was the slowest headline inflation in three months or since 4.1% in March.
As of the first half of the year, inflation averaged 4.8%, still above the BSP’s 4% ceiling. The BSP expects the headline print to settle at 6.4% by yearend.
“Inflation slowed in June as easing oil price pressures and continued government measures to strengthen food supply helped temper price increases,” the Department of Economy, Planning, and Development said in a separate statement, likewise noting easing tensions in the Middle East.
National Statistician Claire Dennis S. Mapa said inflation in transport cooled to 12.8% in June from 16.2% in May, while food and nonalcoholic beverages eased to 5.2% from 5.7%.
Local fuel retailers cut the price of gasoline by as much as P7.50 per liter and diesel by as much as P21.19 per liter last month. On the other hand, kerosene climbed by P1.98 per liter.
This led inflation for gasoline to ease to 39.2% in June from 51.6% in May, and diesel slowed to 39% from 58.5%.
Food inflation cooled amid lower meat and fish prices as easing oil costs helped boost fishing activity in the country, the BSP said.
The price of meat products declined at a faster pace of -4.2% in June from the 2.5% drop a month ago. Inflation for cereals and cereal products slowed to 12.1% from 12.6%, while fish and other seafood eased to 7.8% from 8.8%.
Rice inflation likewise slowed to 15% in June from 15.6% in May as prices declined month on month, which the BSP attributed to the arrival of imports and temporary price ceiling set during the period.
The price of regular milled rice slipped by 2.67% to P49.67 a kilo in the second half of the month from P51.03 in the same period in May, while well-milled rice was nearly 3% cheaper at P56.15 a kilo from P57.88 in the prior month.
“Nonetheless, higher vegetable prices due to limited supply during the off-season tempered the slowdown in headline inflation,” the BSP added.
STICKY CORE INFLATION
Meanwhile, core inflation, which discounts volatile fuel and food prices, bucked the headline trend as it quickened for a sixth consecutive month to 4.4% in June from 4.1% in May and 2.2% last year.
This matched the December 2023 reading and was the fastest pace in 31 months or since 4.7% in November 2023.
In a separate statement, the Philippine central bank said still elevated global oil and fertilizer prices continue to feed into the cost of fuel and food in the Philippines, showing “inflationary pressures remain strong.”
“Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations,” the BSP said.
According to PSA’s Mr. Mapa, faster price increases in utilities, restaurants and accommodation services, and education services, among others pushed the core print to an over two-year high.
In June, inflation for housing, water, electricity, gas, and other fuels picked up to 8% from 7.8% in May, largely driven by the 12% electricity inflation from 8.8% in the prior month.
This came after Manila Electric Co. hiked its electricity rate by 14.88 centavos per kilowatt-hour (kWh) to P14.4833 per kWh last month, which meant households consuming 200 kWh monthly had to pay P30 more in their total electricity bills.
Meanwhile, inflation for restaurants and accommodation services quickened to 7% from 6.7% a month earlier, while inflation for education services accelerated to 3.9% from 2.9%.
Mr. Mapa said they will monitor price movements in the National Capital Region (NCR) in relation to the upcoming wage hike in the region this month, as the labor component also weighs on the country’s inflation.
The minimum wage in NCR is set to increase by P60 on July 19, bringing it to P755 for nonagricultural workers and to P718 for agricultural workers and employees of retail, service, and small manufacturing establishments. The second tranche of the wage hike or P25 will be implemented in January next year.
PSA data also showed inflation in NCR was slower at 4.9% in June from 5% in May, but picked up from 2.6% a year ago.
Outside NCR, it eased to 6.7% from 7.1% in the previous month, but was faster than 1.1% last year.
For the bottom 30% of income households, inflation cooled to 8% in June from 8.4% in May. However, this was significantly faster than -0.4% recorded in June 2025.
BSP TO REMAIN HAWKISH?
The BSP said the latest local and international developments, particularly in the oil market, will guide their decision for their next monetary policy review on Aug. 27.
“The Monetary Board will continue to be guided by incoming data and is prepared to take further monetary action as needed to ensure that inflation returns to the 3% target,” it added.
The BSP has raised its benchmark rate by a total of 50 basis points (bps) since April, bringing it to 4.75%.
ING Regional Head of Research for Asia-Pacific Deepali Bhargava noted that looming inflationary risks from the recent wage hike and the upcoming El Niño season give the BSP reason to continue tightening.
“Taken together, while headline inflation has eased, we don’t believe the BSP has enough evidence yet to declare victory,” she said in a report.
“Persistent core inflation, rising wages and lingering food price risks should keep policymakers focused on ensuring inflation expectations remain anchored, supporting our expectation of further rate hikes by the BSP.”
Chinabank Research also sees a third straight BSP rate hike in August as the faster core inflation reflects that the Middle East war’s impact on energy prices is “becoming more entrenched.”
“Key upside risks to inflation remain, which could keep the BSP on a hawkish footing,” it added.
Meanwhile, HSBC Global Investment Research Senior ASEAN Economist Aris D. Dacanay expects the BSP to be more hawkish and deliver 75 bps more in hikes by end-2026.
“Due to the upside surprise in wage hikes, we expect the BSP to stay on a hiking path for the rest of 2026 despite inflation being below expectations over the past two months,” Mr. Dacanay said in a separate report.
“We expect the BSP to increase rates to 5.5% by the end of the year,” he added, noting that the central bank may reverse its path to ease borrowing costs by the second half of 2027.
In a separate commentary, Citigroup, Inc. (Citi) said moderating headline inflation and prospects of gradual economic recovery by the second half of the year signal weaker threats of stagflation for the Philippines, although risks remain.
Citi economists Wei Zheng Kit and Helmi Arman noted that the Philippine economy may slightly rebound starting in the second half of the year until 2028, but with growth to remain weaker than its performance in recent years.
“The Philippines is likely to achieve only a gradual, below-trend growth recovery in the second half of 2026 and into 2027-28,” they said. “The recovery will be uneven: Public construction resuming gradually, consumption recovering as inflation moderates, and investment cautious pending political resolution.”
Citi also noted that an August hike remains likely, with a pause in October to come only if lower oil prices prompt the BSP to materially cut its inflation and growth estimates.
