Inflation Update: Philippine inflation set to continue downward trend 

August 2024 saw Philippine headline inflation drop to 3.3% year-on-year, down from 4.4% in July, signaling what we believe to be the start of a sustained downward trend. We talked about the factors bearing on inflation in our article recently.

Just as we expected, this decline was primarily driven by a slowdown in rice inflation, which fell to 14.7% from 20.9% in the previous month. With rice prices stabilizing and considering high base effects, we anticipate rice inflation to enter single digits as early as September.

Core inflation continued its downward trend, reaching 2.6%. These factors, combined with the impact of lower rice tariffs, lead us to forecast inflation reaching the 2% range in the coming months.

The moderating inflation outlook creates a favorable environment for further monetary easing. We forecast that the Bangko Sentral ng Pilipinas (BSP) will continue its easing cycle with two more 25-basis-point cuts in the upcoming Monetary Board meetings scheduled for October 17 and December 19.

This would bring the BSP’s policy rate to 5.75% by year-end. However, we remain cautious about potential upside risks, particularly the possible impact of La Niña on agriculture. Despite these considerations, we maintain our full-year inflation forecast at 3.3%, reflecting our assessment of balanced risks to the inflation outlook for the remainder of 2024.

Download our report below for more details.

INFLATION UPDATE

Inflation to take a sleigh ride down going into “ber” months

Inflation continued to slow in August. We expect it to continue to slow down which would lead to more rate cuts by the central bank.

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