Headline inflation reached 5.7 percent year-on-year in July compared to 5.2 percent in June using the 2012-based Consumer Price Index (CPI) series. The year-to-date average of 4.5 percent is above the Government’s announced inflation target range of 3.0 percent ± 1.0 percentage point for 2018. Similarly, core inflation—which excludes certain volatile food and energy items to measure underlying price pressures—increased to 4.5 percent in July from 4.3 percent in the previous month. Meanwhile, month-on-month seasonally-adjusted headline inflation declined to 0.5 percent in July from 0.6 percent in June.
The higher inflation in July was attributed largely to the increase in prices of food, utilities, and transport services. Some tightness in domestic supply conditions linked to recent weather-related disturbances—resulted in higher prices of some food items, particularly rice, meat, fish, and vegetables. The tobacco inflation rate also rose due to the scheduled excise tax increase in July 2018. Similarly, upward adjustment in electricity and water rates, as well as the provisional increase in the minimum jeepney fares also contributed to the rise in non-food inflation for the month.
The latest inflation reading remains consistent with the BSP’s prevailing assessment based on its latest forecasts that inflation will remain elevated in 2018, with the peak occurring sometime in the third quarter, and will converge to the inflation target of 2-4 percent in 2019. The BSP will carefully consider the latest developments and their impact on price dynamics at its upcoming monetary policy meeting on 9 August 2018. The BSP stands ready to undertake strong follow-through monetary policy action to help ensure that 2019 inflation target is achieved.