Inflation Preview: Electric shock  

Consumer price rise is seen to quicken in June, but that’s neither driven by costs of oil nor rice—rather by electricity costs.

Metrobank Research forecasts annual headline inflation in June to slightly accelerate to 1.6%. This translates to a 0.3% month-on-month (MoM) increase.

Declining rice prices

Rice continued to exert downward pressure on inflation this month, marked by sustained month-on-month and year-on-year deflation. This is primarily driven by declining global rice prices, and high local supply due to the harvest season. The expected annual deflation also continues to be exacerbated by high base effects, resulting from the significantly elevated prices recorded last year.

Oil deflation despite tensions

In the fourth week of June, Filipino consumers faced significant oil-price hikes. Global oil prices spiked due to escalating Iran-Israel tensions, which simmered down eventually in the past few days due to a US-brokered ceasefire. This cascaded locally and led oil companies to impose two staggered pump price increases. Diesel prices rose by more than PHP 5 per liter, and gasoline by over PHP 3 per liter in a week’s time.

Despite these large increases toward the end of the month, current prices remain lower than those recorded during the same period last year. This trend is expected to sustain the deflation observed in both diesel and gasoline prices since late last year.

“Electric shock”

A major source of upside pressure for annual inflation this month is electricity rates across major electric distribution companies including Meralco, Visayas Electric and Davao Light. This is expected to slightly offset annual deflation in rice and oil prices.

While electricity rates set this month by major power distribution companies across the country decreased from the preceding month due to lower Wholesale Electricity Spot Market (WESM) costs, they remained higher relative to the same period last year. Notably, Meralco experienced a substantial year-on-year jump, as its June 2024 electricity rate was then the lowest since December 2009.

Metrobank’s Take  

With major commodities such as rice and oil anticipated to settle lower this month, we anticipate headline inflation in June to settle at 1.6%. With this, the Philippines remains on track to settle within the adjusted 2-3% target this year. This target was recently adjusted from 2-4% during the 191st Development Budget Coordination Committee (DBCC) meeting on June 26, 2025.

Although upside risks on inflation attributed to US President Donald Trump’s tariff and potential escalation of geopolitical tensions remain, inflation is seen to remain target-consistent inflation in the full-year. This provides the Bangko Sentral ng Pilipinas room to lower policy rates further this year.

(Disclaimer: This is general investment information only and does not constitute an offer or guarantee, with all investment decisions made at your own risk. The bank takes no responsibility for any potential losses.)

MARIAN MONETTE FLORENDO is a Research Officer of the Research and Market Strategy Department, Institutional Investors Coverage Division, Financial Markets Sector, at Metrobank. Her academic background is in Mathematics and Economics. She loves solving puzzles and watching mystery movies.