The slight uptick in June inflation has failed to dim analyst projections of further monetary easing by the central bank next month as consumer prices remain below target and economic growth stays largely intact.
This paper reported on Friday headline inflation rose to 1.4 percent in June from 1.3 percent in May, as shown by data released by the Philippine Statistics Authority (PSA).
The June rate brought the average for January to June 2025 to 1.8 percent, still below the Bangko Sentral ng Pilipinas (BSP)’s 2 to 4 percent target band for 2025.
The BSP has already reduced policy rates by a total of 50 basis points so far this year, most recently in June, bringing the benchmark reverse repurchase (RRP) rate down to 5.25 percent.
BSP Governor Eli Remolona Jr. said the move reflects easing inflationary pressures.
Analysts now expect additional rate cuts in the coming months, as the central bank signals a more dovish stance.
Room to cut
HSBC economist Aris Dacanay said inflation could fall below the BSP’s target band for the full year, giving the Monetary Board space to deepen its easing cycle.
“Our baseline forecast is for the BSP to cut to a neutral rate of 5 percent, especially as growth remains relatively resilient,” Dacanay said. “But if the outlook deteriorates, the rate could fall below that.”
He added that the risk now leans toward more aggressive easing: “The BSP can cut deeper — because it can.”
BPI chief economist Emilio Neri Jr. likewise expects another rate cut soon, but flagged the uncertainty around US monetary policy as the most significant risk.
“It’s unclear whether the Fed would lower rates this year. If US inflation picks up or tariffs begin to hit consumers, the Fed may delay cuts, which could weaken the peso and limit the BSP’s room to maneuver,” Neri said.
He sees Philippine inflation staying below 2 percent through August, helped by soft rice prices and easing oil markets, though this could shift by September once base effects wear off.
Policy risk
Citi analysts project three more 25-bps cuts — two this year and one in early 2026 — with inflation seen remaining below target through the first quarter of next year.
RCBC chief economist Michael Ricafort also expects inflation to hover near the 1–2 percent range in the near term, allowing further rate cuts as long as no major supply shocks or geopolitical escalations disrupt the current trend.
However, he noted that the recent P50 minimum wage hike in Metro Manila, effective July 18, may trigger mild upward pressure on prices in the coming months.
Other economists echoed the need for caution.
PIDS senior research fellow John Paolo Rivera warned that non-food price pressures, such as utilities, remain sensitive to external shocks. He also pointed to upcoming wage adjustments, transport fare hike petitions, and weather-related disruptions as possible inflation risks.
Jonathan Ravelas, senior adviser at Reyes Tacandong & Co., called for preemptive support measures, including targeted subsidies and energy efficiency programs, to shield vulnerable households from cost-of-living spikes.
Meanwhile, Ateneo economist Leonardo Lanzona said inflation appears increasingly tied to sluggish economic activity rather than commodity-driven volatility.
He pointed to a mixed picture in manufacturing, where output rebounded in June but remained modest after earlier contractions.
