Angelo Taningco
Economist, Treasury Group

Philippine consumer price inflation remains manageable for the month of July with its outlook now pointing towards a more modest inflationary environment. This is based on the headline consumer price index (CPI) inflation inching up to 2.8% year-on-year (yoy) in July from the revised June print of 2.7% yoy, according to the latest inflation report of the Philippine Statistics Authority (PSA) released on 4 August. Meanwhile, core CPI inflation-which excludes volatile food and energy components-dropped to 2.1% yoy in July from 2.6% yoy in June, suggesting that the underlying trend and future path of inflation are likely to be moderate and manageable (Figure).

Figure: Philippine CPI inflation
Jan. 2015 – Jul. 2017
(yoy %)

 
The higher yoy headline inflation rate for July vis-à-vis June was due to faster price increases in four commodity groups in the CPI: i) housing, water, electricity, gas and other fuels; ii) transport; iii) education; and iv) restaurant and miscellaneous goods and services. Among the four, transport recorded the sharpest price increase and this was largely induced by a fare hike in rail transport services within the National Capital Region (NCR), which saw sharper inflation at 3.8% yoy for the month versus 3.1% yoy in the previous month. In the remaining seven commodity groups of the CPI, two garnered slower yoy price hikes and the rest had steady inflation. Meanwhile, inflation in areas outside the NCR was likewise steady at 2.6% yoy.

In the first seven months of the year, headline and core inflation averaged 3.1% yoy and 2.7% yoy, respectively. The year-to-date headline inflation is slightly higher than our 2017 forecast of 3.0% yoy. Both figures are within the Bangko Sentral ng Pilipinas (BSP) inflation target range of 2.0% – 4.0%.

The latest inflation trend has reaffirmed our belief that the BSP’s Monetary Board will decide on 10 August to keep its monetary policy settings unchanged. Our inflation outlook also supports our view of no monetary policy adjustment for the rest of the year.

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