With rice prices still seen to have dropped further recently, the central bank has forecast that increases in consumer prices likely slowed even more in July, following the five-and-a-half-year lows of 1.4 percent in June and 1.3 percent in May.

As such, private-sector economists said that the possibly very low July headline inflation rate would pave the way toward another interest rate cut when the policy-setting Monetary Board (MB) next decides on the monetary policy stance on Aug. 28.

Last month’s inflation could have slowed by as much as 0.8 percentage points (ppts) to 0.5 percent, according to the Bangko Sentral ng Pilipinas’ (BSP) forecast released on Thursday, July 31.

May’s inflation has become the upper end of the BSP’s forecast range, with 0.5 percent as the lower end—if realized, the slowest in nearly six years. The BSP’s forecast for July is lower than its June projection of 1.1 to 1.9 percent.

Likely factors that have contributed to an uptick in price hikes last month were “higher meat and vegetable prices partly due to unfavorable weather conditions, increased electricity rates, elevated domestic fuel costs, and the depreciation of the peso.”

“These price pressures, however, could be partially offset by the continued decline in rice prices,” the BSP said.

Last week, the Philippine Statistics Authority (PSA) indicated that it anticipates consumer prices, particularly for rice, will continue to decline in the current quarter, including July.

However, it said that weather disturbances are expected to drive up vegetable costs.

National Statistician and PSA Undersecretary Claire Dennis Mapa earlier told Manila Bulletin that “certain items, such as vegetables, are expected to increase. Other items, like rice, will continue with negative inflation.”

Mapa had noted that typhoons, a string of which ravaged the country in July, typically cause price hikes in agricultural commodities, particularly vegetables.

In June, a substantial drop in rice prices to their lowest in three decades, or since 1995, helped temper the overall inflation uptick. Rice prices deflated faster in June, falling by 14.3 percent compared to a 12.8-percent drop in May. This trend was pointed towards the recent launch of the cheaper ₱20-per-kilo rice.

“Going forward, the BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy decision-making,” it said.

In an Aug. 1 report, MUFG Global Markets Research senior currency analyst Lloyd Chan said that the BSP’s inflation forecast range for July “potentially [opens] the door for further rate cuts.”

In a July 31 report, Capital Economics senior Asia economist Gareth Leather and deputy chief emerging markets economist Jason Tuvey said that they “expect GDP [gross domestic product] growth in the Philippines to remain relatively strong in 2025, helped by policy loosening from the central bank.”

“Inflation in the Philippines has fallen back sharply and is likely to remain low over the coming year,” they said.

Following the 25-basis-point (bp) cut in the policy rate to 5.25 percent last June and “with inflation set to stay low, we expect more easing before the end of the year,” they added.

In a separate Aug. 1 report, Capital Economics markets economist Shivaan Tandon said that as Asia’s export-driven manufacturing remains weak, and with low inflation expected to persist, most central banks in the region are likely to implement deeper interest rate cuts than currently anticipated.