Philippine inflation slows in June, boosts chances of Q3 rate cut

July 5, 2024 - 10:30 AM
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Vendors work at a public market in Quezon City, Philippines, August 9, 2022. (Reuters/Eloisa Lopez/File Photo)

 Philippine annual inflation slowed in June for the first time in five months, on a slower increase in utility costs, the statistics agency said on Friday, probably strengthening chances for an interest rate cut in August.

The consumer price index rose 3.7% in June, easing from the previous month’s 3.9%, taking the average reading in the year’s first half to 3.5%, within the central bank’s target range of 2.0% to 4.0%.

Cooling prices of housing, water, electricity, gas and other fuels offset the rise in food prices, which quickened to 6.5% in June from 6.1% the prior month, the agency said.

Core inflation, which excludes volatile food and energy prices, came in at 3.1% in June from a year earlier, unchanged from May.

The central bank has previously flagged a possible cut of 25 basis points at its next meeting in August as it expects price pressures to ease further in the second half, when a rice import duty is slashed to 15% from 35%.

The tariff cuts, set to run through 2028, take effect this month.

“The balance of risks to the inflation outlook has shifted to the downside,” the Bangko Sentral ng Pilipinas (BSP) said in a statement.

Last month’s inflation outturn has made the August rate cut “practically baked in,” Emilio Neri, lead economist of the Bank of the Philippine Islands, said in a post on X.

Such a cut would be the first since November 2020, putting the BSP ahead of major central banks in easing rates.

—Reporting by Karen Lema and Mikhail Flores; Editing by Jacqueline Wong and Clarence Fernandez