The Bangko Sentral ng Pilipinas (BSP) indicated that inflation may have peaked already in June at 6.1 percent as it projected that the July inflation could hit the midpoint of 5.6-6.4 percent in July.

BSP Governor Felipe M. Medalla said late Friday, July 29, that inflation could settle at six percent, midpoint of the 5.6-6.4 percent forecast for July, but hastened to add, “or it could be a fluke.”

Medalla noted that in some cases where inflation is thought to have peaked already, other problems prevailed. In the current situation, he said, the war in Ukraine may have other “bad news” that could again raise inflation expectations.

Even if July inflation ends up below June’s 6.1 percent, Medalla said this level is still “way above” the two percent to four percent target. As of June 23, the BSP’s average 2022 forecast for inflation is five percent, but based on its latest private economists’ survey, the market expects higher at 5.1 percent to 5.2 percent.

Inflation in June hit a four-year high of 6.1 percent, bringing the average year-to-date to 4.4 percent. The government is scheduled to release the July inflation rate on Aug. 5 which is Friday this week.

In a separate statement, the BSP said it projects July inflation to settle within the range of 5.6 percent to 6.4 percent as it was “driven by the continued increase in food prices, further transport fare hikes, and peso depreciation.” At the close Friday, the peso was at P55.13 vis-à-vis the US dollar from its previous close of P55.82.

The BSP said lower oil prices, reduction in electricity rates in Manila Electric Co.-serviced areas and lower pork prices are likely to temper in part price pressures in July.

“The BSP will continue to monitor closely emerging price developments to enable timely intervention to arrest emergence of further second-round effects, consistent with BSP’s mandate of price and financial stability,” said the BSP.

Last July 14, the BSP’s Monetary Board made a surprise, off-cycle rate increase of 75 basis points (bps) which brought the policy rate to 3.25 percent. Medalla said they will again raise the key rate by 25 bps or 50 bps when they meet on Aug. 18 to make sure inflation expectations are firmly anchored to their inflation outlook.

After Aug. 18, there are three more scheduled policy meetings in September, November and December. Medalla reiterated that BSP policy actions will all depend on what will happen outside of the Philippines since a lot of the forces that drive inflation are external in nature. Bottomline is that the BSP wants to prevent a high inflation that will create a momentum amid a wage and transport fare adjustments, said the BSP chief.