Inflation cools further in July, setting stage for interest rate cut


Posted at Aug 06 2019 09:08 AM | Updated as of Aug 06 2019 03:52 PM

A woman picks cooking oil from a market stand in Quiapo, Manila. Jonathan Cellona, ABS-CBN News/File

MANILA -- Inflation cooled further in July, holding within monetary authorities' target range for the sixth straight month, and setting the stage for another reduction in interest rates, official data released Tuesday showed.

The consumer price index rose 2.4 in July from 2.7 percent in the previous month, matching the median forecast of 2.4 percent from a Bloomberg poll of economists. The Bangko Sentral ng Pilipinas think tank predicted a 2 to 2.8 percent range.

The July rate was the slowest since January 2017, said National Statistician Claire Dennis Mapa, ahead of the release of gross domestic product data for the second quarter and a Monetary Board meeting on Thursday.

The July data shows that the deceleration is "intact" with rice prices falling due to a new law that imposes tariffs on the staple and a third straight month of reductions in electricity rates, said ING Bank economist Nicholas Mapa.

The peso's strength also contributed to slower inflation by making import costs cheaper, Mapa said in a statement.

The BSP could cut interest rates by at least 25 basis points on Thursday to support economic growth, Mapa said.

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Growth of below 6 percent in the second quarter could prompt the BSP to cut the benchmark rate on Thursday, said First Metro Securities equity research analyst Royce Aguilar.

Economic growth slowed to 5.6 percent in the January to March period, due to the late passage of the 2019 budget. Members of President Rodrigo Duterte's economic team said they would catch up on spending throughout the rest of the year.

This chart tracks the return of inflation to the Bangko Sentral's target range. ABS-CBN Data Analytics

Malacañang attributed cooling inflation to President Rodrigo Duterte’s political will and expressed confidence that price spikes would slow further in the coming months.

"Filipino consumers can rest assured that the Duterte Administration will continue to work tirelessly in implementing macroenomic policies which will have a positive impact that can be felt by our nation," Presidential Spokesman Salvador Panelo said Tuesday.