Philippine inflation quickens to 1.5% in August

By Katherine K. Chan, Reporter

HEADLINE INFLATION picked up to 1.5% in August, as bad weather drove up prices of food, particularly vegetables and fish, the Philippine Statistics Authority (PSA) reported on Friday.

The latest consumer price index (CPI) was faster than the 0.9% in July but slower than the 3.3% logged a year ago.

The August print fell within the central bank’s 1%-1.8% forecast for the month but was slightly higher than the 1.3% median estimate in a BusinessWorld poll of 16 analysts conducted last week.

August also marked the sixth month in a row that inflation settled below the Bangko Sentral ng Pilipinas’ (BSP) 2-4% target range.

For the first eight months, headline inflation averaged 1.7%, on par with the BSP’s 1.7% target for 2025.

Meanwhile, core inflation, which excludes volatile prices of food and fuel, quickened to 2.7% in August from 2.3% in July and 2.6% last year. This was the highest core inflation reading this year.

Core inflation averaged 2.4% in the January-August period, slower than the 3.2% a year ago.

The heavily weighted food and nonalcoholic beverage index was the primary driver of faster inflation during the month, National Statistician Claire Dennis S. Mapa said. The index saw a 0.9% annual increase in August, reversing the 0.2% decline in July.

In particular, food inflation picked up to an annual 0.6% from 0.5% decline in July but slower than the 4.2% in the same period last year.

Inflation in vegetables, tubers, plantains, cooking bananas and pulses contributed most to food inflation last month, accelerating to 10% from a 4.7% decline in July. Mr. Mapa singled out squash as one of the vegetables that saw a price spike.

Quicker inflation was also seen in fish, such as roundscad, and other seafood at 9.5% from 6.3% previously.

“This was driven by slow import arrivals, adverse weather, and above-normal rainfall that disrupted fishing activities in key areas,” the Department of Economy, Planning, and Development (DEPDev) said.

Tropical storms Crising, Dante and Emong, and the southwest monsoon brought heavy rains and flooding in late July until early August, left P4.86 billion worth of agricultural damage.

RICE PRICES
On the other hand, rice prices continued to fall year on year for the eighth month in a row. Rice inflation declined at a faster clip to -17% in August, from -15.9% in July.

“We continuously see that it will remain negative, but this might be the lowest point (this year)… (Rice inflation) will still be negative, but not more than -17%,” Mr. Mapa said.

Rice inflation has been decelerating since the start of the year on the back of the government’s measures to curb rising prices of the staple grain, including lowering rice tariffs to 15% from 35%.

Data from the Department of Agriculture (DA) showed the average price of local regular milled rice dropped by 19.3% year on year to P38.18 per kilogram in the last week of August from P47.32. Well-milled rice likewise fell by 14.3% to P43.52 per kilo from P50.78, while special rice slipped by 5.2% to P56.99 per kilo from P60.1.

Meat inflation slowed to 7.1% in August from 8.8%.

Mr. Mapa said the slower annual decline in transport prices was another reason for the higher inflation in August.

Transport inflation slowed to -0.3% in August, from -2% in July.

Gasoline inflation also fell to -6.1% from a 10% decline in July, while diesel inflation also slowed to -0.8% from -5.6%.

As of Aug. 26, pump price adjustments stood at a net increase of P0.70 per liter for gasoline, P0.50 a liter for kerosene, and P0.30 for diesel.

Mr. Mapa also said that higher fares fueled faster inflation for passenger transport by sea to 64.4% in August from 5.2% in July.

Inflation in the National Capital Region (NCR) quickened to 2.9% in August, from 1.7% in July and 2.3% in the same month in 2024.

Outside NCR, inflation picked up to 1.1% month on month in August from 0.7% but eased from 3.6% in August last year.

Central Visayas recorded the highest inflation rate at 3%, while the Bangsamoro Autonomous Region in Muslim Mindanao experienced the most decrease in prices, with deflation at 1.3%.

Inflation for the bottom 30% of income households stood at -0.6% in August, slightly improving from the -0.8% decline in July.

In the eight months to August, inflation for the bottom 30% averaged 0.4%, easing from the 4.9% a year ago.

LA NINA
“While inflation remains broadly manageable, the recent figures highlight how adverse weather conditions directly impact prices,” DEPDev Secretary Arsenio M. Balisacan said in a statement.

Mr. Balisacan said La Niña conditions, which may develop from September to December, could cause more floods and crop damage.

“In anticipation of these weather shocks, we must ramp up preparatory activities and proactively ensure sufficient food supply to protect Filipino consumers from price volatility,” he said.

In line with the anticipated La Niña by September, the state weather bureau projected that seven to 15 tropical cyclones will hit the country starting this month until February 2026.

“While prices are expected to normalize over time, the potential emergence of La Niña – especially if it brings about stronger and more frequent typhoons – could keep vegetable prices elevated for a longer period,” Chinabank Research said in a note.

OUTLOOK
In a statement, the central bank said inflation expectations “remain firmly anchored to the target.”

“For 2026 and 2027, inflation is expected to trend higher but will remain firmly within the 3.0% + 1.0 ppt (percentage point) target,” it said.

The BSP noted that potential electricity rate adjustments and higher rice tariffs might add inflationary pressures in the coming months.

“The Monetary Board observed that domestic demand has held firm. However, the impact of US policies on global trade and investment continues to weigh on global economic activity. This could temper the outlook for the Philippine economy,” it said.

Aris D. Dacanay, HSBC economist for ASEAN (Association of Southeast Asian Nations), said he does not think the strong inflation momentum seen in August will last.

“Once supply conditions for food stabilize, the momentum seen in both headline and core CPI will likely wane,” he said in a note.

“Base effects will likely fade in the months ahead, leading to headline CPI accelerating year-on-year.”

HSBC forecasts inflation to average below 3% in 2026.

John Paolo R. Rivera, senior research fellow at the Philippine Institute for Development Studies, said attaining the BSP’s 1.7% full-year target will require minimal supply-side shocks going forward.

“Government interventions in rice importation, oil price stabilization, and tariff management will be crucial,” he said in a Viber message. “Any delay in these will raise the risk of missing the target.”

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said inflation in the coming months may return to within the BSP’s 2-4% target band.

“For the coming months, it is possible for inflation to pick up and sustain at 2% levels from September to December, or well within the BSP inflation target range of 2-4%, that could justify further BSP rate cut/s that would match any future Fed rate cuts,” he said.

Mr. Dacanay said the BSP will still likely cut its policy rate by 25 basis points to 4.75% by the end of the year.

Last week, the Monetary Board trimmed the target reverse repurchase rate by 25 bps (bps) to 5%.

BSP Governor Eli M. Remolona, Jr. said the latest cut puts the policy rate at a “sweet spot” in terms of both inflation and output, signaling that the central bank is nearing the end of its rate-cut cycle.

However, he said one last reduction could be possible this year if economic conditions warrant more support.