Economists expect higher August inflation

MANILA, Philippines —  Headline inflation is expected to edge higher in August after slipping to a six-year low of 0.9 percent in July, with economists projecting modest price pressures from higher food, fuel and power costs.

UnionBank chief economist Carlo Asuncion said the August consumer price index (CPI) likely rose by 0.9 to 1.5 percent, with a central forecast of 1.2 percent.

“The slight uptick from July’s 0.9 percent is driven by emerging pass-through effects from higher energy prices, wage adjustments and imported goods, especially amid a weaker peso,” he said.

He flagged rising palay prices in rice-producing regions ahead of the government’s 60-day rice import ban as an upside risk, while supply disruptions from weather disturbances could also add pressure.

On the other hand, base effects and sustained rice deflation, which fell by 15.8 percent year-on-year in July, could temper headline CPI.

UnionBank expects inflation to average 1.6 percent for 2025, below the Bangko Sentral ng Pilipinas (BSP)’s two to four percent target band.

Moody’s economist Sarah Tan also projected the CPI to climb modestly by 1.1 percent in August, citing higher transport and fuel costs.

Still, she noted easing food prices from government measures such as the Department of Agriculture’s lower maximum retail price on imported rice.

“That said, several risks remain.  As the Philippines remains vulnerable to climate shocks, weather disturbances could affect food harvest output, potentially reversing the downward trend in food inflation,” she said.

Global oil prices also pose a threat to inflation if geopolitical tensions escalate. Nonetheless, inflation should average around two percent in 2025 barring sustained supply shocks, Tan said.

Global bank Citi shared the same 1.1-percent forecast for August, but highlighted risks from recent wage hikes, rising electricity rates and the suspension of rice imports.

The bank said the BSP could deliver additional rate cuts in October and February next year, but warned that easing might be delayed if rice and power tariffs drive inflation higher or if third-quarter economic growth proves more resilient than expected.

Reinielle Matt Erece, an economist from Oikonomia Advisory & Research Inc., pegged inflation at one percent in August, pointing to slightly higher vegetable and electricity costs.

But he stressed that inflationary pressures remain weak overall due to sluggish demand and soft global oil prices.

Inflation has stayed below the central bank’s two to four percent target for the past four months, giving the BSP room to ease policy rates by a total of 150 basis points since August last year.

The Philippine Statistics Authority will release the official August CPI report on Sept. 5.