Inflation cools to 2.4% in July

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Metro Manila (CNN Philippines, August 6) — Inflation further cooled in July due to slower price increases of food and electricity, the Philippine Statistics Authority (PSA) said.

Prices of basic goods rose by 2.4 percent last month, softer than June’s 2.7 percent climb and the 5.7 percent pace logged in July 2018. This is the slowest pace since December 2016.

The actual rate is slightly higher than the 2.3 percent median forecast in a CNN Philippines poll done last week, and is in the middle of the 2-2.8 percent forecast range given by the Bangko Sentral ng Pilipinas (BSP). Average inflation from January-July stood at 3.3 percent.

Inflation tracks price adjustments for food, utilities, and other widely-used goods. It is the central bank's duty to ensure stable prices, with the goal of keeping inflation between 2-4 percent.

The PSA said the sustained slowdown came on the back of softer price movements for food and non-alcoholic beverages, which decelerated from 2.7 percent to 1.9 percent in July. Slower upticks were also recorded for housing and utility costs, home furnishings, health, transport, and liquor and tobacco. On the other hand, school-related expenses as well as the cost of clothing and footwear picked up during the month.

Rice prices have dropped compared to a year ago, National Statistician Dennis Mapa said.

"This year, the price of rice started declining already. We’re seeing already a reduction of inflation," Mapa told reporters during a media briefing on Tuesday. "The price of rice was really high last year, around this month. We are seeing a drop and we’re expecting really negative inflation."

Inflation was softer in Metro Manila at 2.3 percent against 2.4 percent in the provinces, data showed. The Mimaropa region saw the biggest price increases at 4.9 percent, although this was slower than the pace recorded in June. The PSA said nine regions enjoyed slower inflation last month, with Central Visayas logging the softest climb at 1.1 percent.

READ: Inflation seen below 4% until 2021

Mapa added that he expects inflation to maintain its descent or to stabilize "at this number" in the coming months. The BSP even expects inflation to settle below 2 percent during the second half of the year — a reversal of the nine-year peak of 6.7 percent tallied in September and October 2018.

Last year's price spikes are said to be food-led, particularly after a rice shortage drove up prices of the staple. This prompted the passage of a law lifting import limits on rice, which was replaced by steeper tariffs for anyone bringing in supply from abroad which started in March.

Analysts have said that easing inflation will allow the central bank to trim interest rates on Thursday, in keeping with plans to unwind the series of tightening moves done in 2018 which were meant to temper surging prices. BSP Governor Benjamin Diokno said it was only logical to unwind the series of rate hikes in 2018 as consumer prices have tempered.

Sought for comment, Diokno said the lower July inflation reading is "not a surprise at all," adding that the figure will be considered during their upcoming rate-setting meeting, together with the second-quarter economic growth data that will be released Thursday morning. Analysts expect growth to pick up from the previous quarter's 5.6 percent, but could still remain below 6 percent for April-June.

CNN Philippines Correspondent Sandra Zialcita contributed to this report.