Headline inflation climbed to 12.2 percent year-on-year in July, bringing the inflation rate to its highest level since 1991. July’s inflation was higher than the 11.4 percent posted in June, and brought the year-to-date average to 8.3 percent. Most major commodity groups, led by food, beverages and tobacco, posted higher inflation rates relative to their levels in the previous month. However, month-on-month headline inflation was lower at 1.5 percent in July from 2.3 percent in June. Core inflation, which excludes certain specific food and energy items to obtain an underlying measure of generalized price pressures, was also slightly down at 6.3 percent year-on-year in July from 6.6 percent in June.
Higher prices of food products pushed inflation higher in July. The food items that drove inflation were rice, cereal preparations, fruits and vegetables, and miscellaneous food items (mainly coffee, cocoa, tea, salt, and cooking oil). While domestic rice prices declined in July relative to June, lower prices a year ago yielded higher year-on-year rice inflation in July. Recent typhoons affected the supply of fruits and vegetables while more expensive flour drove the prices of cereal products higher. Elevated global oil prices were reflected in higher domestic pump prices of petroleum products and transport fares in July.
The BSP is determined to keep a firm grip on inflation and inflation expectations and will respond appropriately to safeguard price stability. Monetary policy will ensure that inflation expectations remain anchored to avoid a wage-price spiral and minimize the adverse impact on economic activity.