Finance Secretary Ralph G. Recto said that inflation may have already reached its highest point, projecting a gradual decline in the rate of food price increases in the coming months.

Recto stated that the continued moderation in inflation may lead the Bangko Sentral ng Pilipinas (BSP) to consider a reduction in its key interest rates "soon."

“Inflation may have peaked and is on the way down,” Recto told Manila Bulletin in a mobile phone message on Sunday, July 7. “We expect food inflation to continuously decrease.”

Last week, the Philippine Statistics Authority reported that inflation dipped to 3.7 percent in June, from 3.9 percent in May.

Notably, June is the first time this year that the pace of price increases has softened while staying within the government's target range of two percent to four percent.

“Maybe we can reduce policy rates soon,” said Recto, the Cabinet representative of President Marcos on the Monetary Board.

READ: Analysts have suggested that he country’s inflation rate may have peaked this year after the rice tariff cut was implemented.

Over the weekend, several analysts also said that inflation may have reached its peak this year, but noted that some headwinds may affect this outlook.

The Bank of the Philippine Islands, in its June inflation report, said that cutting interest rates while the country’s foreign debt has been outpacing foreign reserves would make the build-up of foreign exchange reserves more challenging.

“In addition, aggressive rate cuts are unlikely given the prevailing inflationary environment. Global supply constraints and geopolitical tensions are contributing to a faster rise in prices compared to the past decade, limiting the BSP's room for significant rate reductions,” it added.

“We only expect two rate cuts this year from 6.5 percent to 6.0 percent,” it further said.

Meanwhile, ING Asia-Pacific Head of Research Robert Carnell said that the peso depreciation has been a major constraining factor in slashing policy rates amid doubts about the timing of the Fed's first rate cut.

“This will certainly be easier to achieve if it comes against a backdrop of solid growth yet moderating inflation. For now, we are assuming that this is achieved, and are pencilling in a 25bp cut in 3Q24,” Carnell stated.