Inflation increases further to 2.7 percent in July

August 5, 2020

Year‐on‐year headline inflation increased to 2.7 percent in July from 2.5 percent in the previous month and was within the BSP’s expected range of 2.2‐3.0 percent for the month. The resulting year‐to‐date average inflation rate of 2.5 percent was within the Government’s target range of 3.0 percent ± 1.0 percentage point for the year. Core inflation—which excludes selected volatile food and energy items to measure underlying price pressures—also rose to 3.3 percent year‐on‐year in July from 3.0 percent in June. Meanwhile, month‐on‐month seasonally‐adjusted inflation was at 0.4 percent in July, unchanged from the previous month’s rate.

Overall inflation continued to increase driven mainly by the higher inflation for non‐food items. Year‐on‐year transport inflation rose as higher global oil prices led to upward price adjustments of domestic petroleum products while inflation for transport services also accelerated attributed, in part, to the relatively limited public transportation available to service public needs. At the same time, year‐on‐year inflation for alcoholic beverages and tobacco remained elevated and continued to post double‐digit rates in July. On the other hand, food inflation eased further on lower inflation rates of fish, fruits, and vegetables, which more than offset the increase in meat inflation.

The latest inflation outturn remains consistent with the BSP’s prevailing assessment that inflation is expected to be benign over the two‐year policy horizon due largely to the potential adverse effect of COVID‐19 on economic prospects here and abroad. The Monetary Board will consider the latest inflation developments and outlook including the release of the Q2 2020 GDP data at its upcoming monetary policy meeting on 20 August 2020. Going forward, the BSP will continue to monitor evolving economic and financial conditions to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate.