Headline inflation rose to 2.6 percent year-on-year in July from 2.3 percent in the previous month, with higher inflation rates recorded for fuel, light, and water; food, beverages, and tobacco; and services. The year-to-date average was maintained at 2.6 percent. Month-on-month, headline inflation rose by 0.8 percent in July from 0.6 percent in June.
The uptick in July inflation can be traced to the higher cost of electricity generation and systems loss charges; higher prices of selected food items such as dairy products, eggs, fruits and vegetables, and meat; and higher educational costs. Core inflation, which excludes volatile food and energy items, rose faster at 3.0 percent from 2.5 percent in June.
The July inflation was significantly lower than the 6.4 percent inflation posted a year ago but was slightly higher than the 1.8-2.5 percent forecast range of the Bangko Sentral ng Pilipinas (BSP). Indicators continue to show manageable inflation pressures for the rest of the year. The increase in demand remains moderate and the strong peso is seen to temper price pressures in the near term.
However, risks to future inflation remain. The continued volatility in oil prices, possible occurrence of unfavorable weather conditions, recent wage adjustments, the approved hike in transport fares, and the possibility of sustained high domestic liquidity could generate higher risks to the inflation outlook. Consistent with its mandate to maintain stable prices, the BSP is closely monitoring these and other risks to future inflation in order to craft responsive and forward-looking monetary policies.