Inflation hits new 4-year high in July at 6.4%

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Metro Manila (CNN Philippines, August 5) — Metro Manila (CNN Philippines, August 5) Inflation zoomed to a fresh high in nearly four years in July at 6.4%, with food and transport costs still leading the increase in commodity prices, the Philippine Statistics Authority (PSA) said Friday.

The latest pace, which surpassed the 6.1% logged this June and 3.7% in July 2021, is also the quickest since October 2018 when inflation hit 6.9%.

Year-to-date inflation is now at 4.7%, remaining above the central bank's 2-4% target for 2022.

Food and non-alcoholic beverages topped the list of sources of fast inflation during the month - with seafood, meat, and sugar taking the lead.

Transport came next, mainly driven by fare for passenger transport such as jeepneys, sea transport like ferries, and air travel.

Restaurants and accommodation services placed as third main driver of inflation's acceleration in July, said the PSA.

"Basically these are the meals consumed outside the household. Substantial din kasi ang weight nito sa basket natin, nasa 9.6% at ngayong July lang nagpakita ng pagtaas," said National Statistician Dennis Mapa in a briefing.

[Translation: Their weight in our (inflation) basket is substantial at 9.6% and we only saw this increase in July.]

Quicker inflation again weakened the purchasing power of the peso in July at ₱0.86 from ₱0.87 the month prior.

Inflation in the National Capital Region slowed to 5.1% during the period from 5.6% the month prior.

Areas outside Metro Manila, however, saw a quicker pace at 6.8%, compared to 6.3% in June.

Davao led the 14 regions outside of Metro Manila which posted faster inflation at 8.6%, while Bangsamoro Autonomous Region in Muslim Mindanao had the slowest rate at 3.6%.

Only the Cordillera Administrative Region and Ilocos Region observed slower inflation in July.

The country's poorest families saw inflation rise to 5.9% during the month, from 5% in June, bringing the year-to-date figure to 4%.

Unlike other inflation figures, the rate for this income group still uses 2012 as base year as the PSA is still in the process of rebasing.

What lies ahead

Mapa said higher prices of food and non-alcoholic drinks, along with restaurants, pose threats to higher inflation in the months ahead.

"Iyong pagkain talaga, sa raw form or di kaya iyong cooked form, medyo malaki ang weight talaga niya sa basket natin. At nakikita natin na iyong food basket natin, tumaas na talaga ang inflation rate at patuloy itong pagtaas," the PSA chief said.

[Translation: Food, whether in raw or cooked form, has significant weight in our basket. And we can already see the inflation rate for our food basket rising continuously.]

With July's inflation at the upper end of its 5.6-6.4% target for the month, the Bangko Sentral ng Pilipinas reiterated its assessment of elevated price pressures over the near-term with second-round effects now more felt.

"The BSP recognizes the broadening of price pressures amid the emergence of second-round effects, including the approved wage and fare hikes as well as elevated inflation expectations. The risk to the inflation outlook is tilted on the upside for 2022 and 2023 but is broadly balanced for 2024," the central bank said in a statement.

Posing upside risks over the near-term are higher global prices of non-oil items amid the Ukraine-Russia war, possible second-round impact of higher fuel costs on commodity prices, and domestic food prices in light of several key food item supply shortages, the BSP said.

However, the slower-than-expected global economic recovery amid monetary policy tightening and ongoing uncertainty from the COVID-19 pandemic still pose downside risks to the central bank's outlook.

"The BSP is prepared to take all necessary policy action to bring inflation toward a target-consistent path over the medium term and deliver on its primary mandate of price stability. The upward adjustment in monetary policy rates in May and June and the off-cycle adjustment in July should help moderate inflation expectations," it said.

The BSP Monetary Board will look into its inflation outlook assessment and upcoming second-quarter growth figures in a policy meeting on Aug. 18.

The PSA, meanwhile, is set to report the economy's performance from April to June on Aug. 9.