Consumer prices likely moderated in June on the back of lower food and fuel costs, though sticky underlying pressures are poised to keep the central bank on a hawkish path.

Headline inflation may have cooled to as low as six percent last month, the Bangko Sentral ng Pilipinas (BSP) said in a statement on Tuesday, June 30. However, higher electricity rates and costlier vegetables likely capped the improvement, prompting the central bank to project an upper forecast limit of seven percent.

This forecast suggests a potential deceleration from May, when inflation clocked in at 6.8 percent after peaking at 7.2 percent in April. While on a downward trend, June inflation is still expected to remain well above the government’s four percent target ceiling.

Union Bank of the Philippines (UnionBank) projects June inflation to have modestly quickened to 6.9 percent. It noted that while falling oil prices may have helped ease transport and power costs, pressures on the peso, import costs, and second-round effects persist.

While this lowers inflation from its recent peaks, it is not enough to signal a meaningful moderation in price growth. “Inflation is stabilizing, but not yet declining convincingly,” UnionBank Chief Economist Ruben Carlo O. Asuncion said.

With price pressures from recent shocks still feeding into domestic costs, Asuncion believes the BSP will likely maintain its hawkish stance. He sees the key interest rate peaking at around 5.5 percent—75 basis points above the current 4.75 percent.

The BSP stated that it will maintain a close watch on developments impacting domestic price movements and economic growth. “It will continue to monitor recent developments in the Middle East for their implications for inflation and economic activity,” the central bank said.

For this year, the BSP projects headline inflation to average 6.4 percent. If realized, this would mark the highest level since the food crisis of 2008.

Meanwhile, the government's economic team recently slashed the 2026 growth target to a range of 3.5 to 4.5 percent, down from the previous five to six percent. If realized, this would mark the weakest economic growth in six years, following the Covid-19 pandemic contraction in 2020.

Domestic growth stood at 2.8 percent in the first quarter, continuing a slowdown first observed in late 2025 following the eruption of a high-profile flood control controversy.