Poll: Inflation likely stayed at 6.4 pct. in July

MANILA, Philippines — Inflation likely held steady in July as higher fuel and electricity costs largely offset lower food prices, keeping price growth well above the central bank’s target and reinforcing expectations that policymakers will keep interest rates elevated.

Consumer prices likely rose 6.4 percent year on year, according to the median estimate of 14 economists surveyed by the Inquirer last week. If accurate, inflation would match June’s pace and remain within the Bangko Sentral ng Pilipinas’ (BSP) projected range of 5.6 percent to 6.6 percent.

READ: BSP sees inflation holding above target in July

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Both the market consensus and the BSP’s forecast suggested inflation stayed well above the official 3-percent target. Economists said cheaper rice and vegetables helped temper price pressures, although higher fuel and electricity costs continued to keep inflation elevated.

“Fuel inflation is likely to continue edging higher, driven by increases in retail fuel prices,” said Deepali Bhargava, head of Asia-Pacific research at ING Bank, whose forecast matched the consensus. “Services inflation is expected to remain sticky, reflecting persistent underlying price pressures in the sector.”

Likewise, Alvin Arogo, chief economist at Philippine National Bank, said lower rice and vegetable prices likely offset higher petroleum and electricity costs.

Forecasts diverged on the overall trajectory. Miguel Chanco, chief emerging Asia economist at Pantheon Macroeconomics, expects inflation to ease to 6 percent as food-price pressures continue to cool. Transport inflation, however, likely stayed near June’s pace at “close to 13 percent” because of renewed fuel price hikes, he said.

By contrast, Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, expects inflation to accelerate to 6.7 percent, citing renewed price pressures from selected food items, utilities and the lingering pass-through of higher fuel and transport costs.

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“We also expect core inflation to continue edging higher, suggesting that underlying price pressures remain broad-based despite the recent moderation in headline inflation,” Asuncion said.

The differing forecasts underscore uncertainty over the inflation outlook, although most economists agreed underlying price pressures remain persistent, likely keeping the BSP on its tightening path.

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READ: Inflation eases to 6.4% in June

Since April, the BSP has raised its benchmark rate by a cumulative 50 basis points to 4.75 percent to anchor inflation expectations despite slowing economic growth. Still, BSP Governor Eli Remolona Jr. has said there is “little chance” the central bank would resort to aggressive rate increases in response to renewed price pressures.

“Subdued growth alongside above-target inflation translates to measured BSP rate hikes,” said Nicholas Mapa, chief economist at Metropolitan Bank & Trust Co., who expects July inflation to edge up to 6.5 percent. “Gov. Remolona balances the need to fight inflation while staying mindful of the soft growth outlook.” /pai INQ