Headline inflation eased further to 4.0 percent year-on-year in July, from 4.1 percent in June, and was within the monthly forecast range of 3.9 to 4.7 percent of the Bangko Sentral ng Pilipinas for the month.
The deceleration was traced mainly to slower price increases for non-food items, as year-on-year transport inflation eased further, owing to base effects resulting from the significant increase in tricycle fares in the same period in 2020.
However, it should be noted that month-on-month transport inflation has gone up due to higher domestic petroleum prices, that reflected rising international oil prices.
Food inflation also rose in July with corn, fish, oils and fats, and vegetables posting higher year-on-year inflation rates.
BSP said it will remain on guard against challenges posed by the coronavirus pandemic to keep the country’s inflation rate within the target band.
In a Viber message to journalists yesterday, BSP Governor Benjamin Diokno said the increases in commodity prices in the international market due to supply-chain factors and the recovery in global demand are upside risks to domestic inflation.
But these risks are expected to be countered by the emergence of new Covid-19 variants and delays in easing lockdown measures, he said.
“The BSP remains watchful over the evolving economic conditions and challenges brought about by the pandemic to ensure that the monetary policy stance remains consistent with its price and financial stability objectives,” he added.
Diokno said last month’s inflation rate is within the central bank’s forecast range.
He said this is in line with monetary authorities’ projection that inflation will remain near the upper-end of the target band until the third quarter, and slow further to within-target range before the end of the year “as the impact of government supply side measures take effect.”
He said inflation is expected to stay at the midpoint of the target band from 2022 to 2023.
“The continued implementation of direct non-monetary interventions to ease supply constraints remains crucial in tempering inflation pressures,” he added.
Diokno said the latest inflation report and the second-quarter gross domestic product report, which the Philippine Statistics Authority is scheduled to release on Aug. 10, will be among the factors that will be assessed by the central bank’s policy-making Monetary Board during its rate setting meet on Aug. 12.*PNA
