Headline inflation hit 11.4 percent year-on-year in June - the highest in more than 14 years - from 9.5 percent (revised) in May and 2.3 percent a year ago, bringing the year-to-date average to 7.6 percent. Most major commodity groups, led by food, beverages and tobacco, posted higher inflation rates relative to their levels in the previous month. Month-on-month, headline inflation was also higher at 2.3 percent in June from 1.5 percent in May. Core inflation, which measures the underlying trend in inflation by excluding specific food and energy items, accelerated further to 6.6 percent year-on-year in June from 6.2 percent in May.
Food and oil prices continued to push inflation higher in June. Food items which contributed significantly to inflation were rice, meat, fish, fruits and vegetables, and miscellaneous food items. Recent typhoons affected agricultural crops, particularly fruits and vegetables, and the supply of fish. In addition, more expensive input costs continued to drive rice and meat prices higher. The high global prices of oil were reflected in the four rounds of increases in the domestic pump prices of petroleum products in June.
The current inflation is consistent with the Bangko Sentral ng Pilipinas (BSP) outlook that inflation will reach double-digits beginning in June this year. The inflation path is expected to peak in the third quarter of 2008 and decline thereafter toward single-digit levels in 2009, as price increases in food and oil may not be sustainable. While inflation continues to be influenced by supply-side pressures, there are indications that such pressures have started to feed into demand, with core inflation steadily rising since December 2007. Monetary authorities have acted last month to address risks to inflation and they stand ready to adjust monetary policy settings further as and when necessary to achieve the price stability objective of the BSP.