Higher food, fuel prices likely drove up inflation in July

MANILA, Philippines — Higher fuel and food prices, compounded by a surge in power rates and a weak currency, likely stoked inflation in July, the Bangko Sentral ng Pilipinas said.

In a statement on Friday, the BSP said it expects inflation to settle between 3.9-4.7% in July. If the upper-end of the forecast range is realized, it would be faster than 4.1% annual reading recorded in June and would settle above the central bank’s 2-4% annual target.

State statisticians will report the official July inflation data on August 5.

Much of the price concerns are hinged on global petroleum prices staying elevated for the past month as easing lockdowns boost demand for oil, thereby pushing domestic fuel costs up. Because the Philippines is a net oil importer, the peso’s current weakness also added some upward price pressure. Energy department data showed local oil companies adjusted fuel prices four times this month, mostly increases.

At the same time, key food items also got more expensive this month, the BSP said, as heavy monsoon rains damage crops. Prices of meat, especially pork, also stay high as the local African swine fever outbreak remains uncontained, although authorities expect some easing of price pressures as pork supply from abroad arrives.

On top of that, power costs inched up in July for customers of Manila Electric Co., the country’s largest power distributor, on the back of higher electricity prices in the energy spot market.

"Moving forward, the BSP will continue to monitor emerging price developments to ensure that its primary mandate of price stability conducive to balanced and sustainable economic growth is achieved," the central bank said.

Notwithstanding, the central bank repeatedly said its monetary policy stance will remain accommodative for this entire crisis, holding off any rate changes that could push interest rates and derail the country’s fragile recovery from a pandemic-led recession. Some like Gilbert Lopez, head of research for Macquarie Capital Securities, noted that inflation in the Philippines is of “no concern” at the moment.

“We think inflation is less of a concern these days. That helps the policy rate, the taper risk is there but rapidly being pushed back,” he said in a midyear briefing of the Philippine Stock Exchange on Thursday.