The Bangko Sentral ng Pilipinas said over the weekend inflation in July likely reached as high as 6.4 percent from 6.1 percent in June on higher prices of food, transport fares and weaker peso.
The BSP, in a statement, estimated that the July inflation settled within a range of 5.6 percent to 6.4 percent.
“Inflation for the month was driven by the continued increase in food prices, further transport fare hikes and peso depreciation,” it said.
It said lower oil prices, reduction in electricity rates in Meralco-serviced areas and lower pork prices may have tempered the price pressures.
“The BSP will continue to monitor closely emerging price developments to enable timely intervention to arrest emergence of further second-round effects, consistent with BSP’s mandate of price and financial stability,” it said.
Standard Chartered Bank earlier said the BSP might hike by 50 basis points the policy rate in its August meeting on continued elevated inflation.
“We now expect more front-loaded tightening, with a 50-bps hike in August and 25-bps moves in both September and November; we had previously expected 25-bps hikes at each of this year’s four remaining meetings,” it said.
“We estimate that the output gap will turn positive by end-2022, and that inflation will continue to broaden amid the robust economic recovery,” it said.
The BSP said it was ready to use the “full force” of its available measures to lessen the impact of the latest 75-basis-point hike in policy rate by the US Federal Reserve that aims to control the rising inflation in the world’s largest economy.
It was the Fed’s second straight 75-bps increase and the fourth rate hike this year, as the US central bank moved aggressively to cool the strongest surge in inflation in more than four decades.
The BSP said the action of the Fed, along with the tightening of global financial conditions and broadening uncertainty over global growth prospects, “could continue to drive exchange rate movements in emerging market economies, including in the Philippines.”
“In order to manage the spillover effects of such external developments, the BSP is prepared to utilize the full force of available measures in order to address the potential risks to Philippine inflation and inflation expectations arising from an overshooting or excessive depreciation of the Philippine peso,” it said.
The BSP said it would continue to be guided by its assessment of the domestic and global developments that affect the outlook for inflation and growth.
The first 75-bps hike by the Fed took place in the middle of June, which boosted the US dollar against global currencies, including the peso.
BSP Governor Felipe Medalla did not rule out the possibility of more policy rate hikes in the coming months but assured that another off-cycle rate increase of monetary authorities would not happen for the rest of the year.
