Philippine Annual Inflation Declines to 3.3% in August, Reports Reuters

By Neil Jerome Morales and Mikhail Flores

MANILA – Annual inflation in the Philippines eased to a seven-month low in August as the rise in food and transport costs moderated, according to the statistics agency on Thursday. This development provides the central bank with the opportunity to further reduce interest rates.

The consumer price index (CPI) increased by 3.3% in August compared to the same month last year, down from a 4.4% rise in July. This brings the average inflation rate to 3.6% for the first eight months of the year, well within the central bank’s target range of 2% to 4%. The last month’s inflation rate was the lowest since January’s 2.8%.

Economists surveyed had predicted an inflation rate of 3.6%. Meanwhile, the core inflation rate, which excludes volatile food and energy prices, also saw a slowdown, dropping to 2.6% in August.

Rice inflation, which contributes nearly 10% to overall inflation, fell to 14.7%, marking the lowest rate since October 2023. National statistician Dennis Mapa indicated that rice prices could decline further in the coming months, potentially reaching single-digit inflation due to base effects.

In response to rising prices, Philippine President Ferdinand Marcos Jr. reduced rice tariffs from 35% to 15%, although the anticipated drop in prices has been slower than expected.

The central bank noted that the reduction in rice tariffs would help alleviate inflation in the upcoming months. They also suggested that inflation risks appear to be leaning towards the downside for this year and next, with a slight chance of an increase in 2026.

The Bangko Sentral ng Pilipinas (BSP) stated it would continue to adopt a careful approach to maintain price stability. The latest inflation figures may facilitate further rate cuts, according to Nicholas Mapa, an economist at Metropolitan Bank and Trust Co., who remarked that the potential for additional cuts this year remains significant.

The BSP recently reduced its benchmark borrowing rate by 25 basis points to 6.25%, marking its first rate cut since November 2020. BSP Governor Eli Remolona indicated that there is still potential for one more interest rate cut this year.