Inflation Update: Lower tariff rates on rice seen to reduce inflation

Following our last inflation report dated June 5, 2024, which indicated a downside bias to the 4.0% average inflation forecast for full year (FY) 2024 owing to the slower-than-expected sequential growth in the May inflation print (3.9% year-on-year), we have revised our 2024 and 2025 forecasts to 3.3-3.6% and 3.3-3.7%, respectively.

Our analysis on the reduced tariff rates to 15% from 35% as approved by the National Economic and Development Authority (NEDA) shows that the current market price of rice could be reduced to around PHP 7 to 9 per kilogram, which will reduce the contribution of rice to headline inflation to -0.2 to 0.2 percentage points, a significant drop from its 1.6-percentage-point contribution in May 2024.