Despite headline inflation easing further to 6.4 percent in June, the Bangko Sentral ng Pilipinas (BSP) warned that price pressures from global oil prices remain strong, assuring the public that it stands ready to take the necessary policy actions to steer inflation back to its three-percent target.

Headline inflation clocked in lower than the 6.8 percent recorded in May but higher than the 1.4 percent posted in June 2025. This modest slowdown comes on the back of easing gas prices, which Chinabank Research attributed to the reopening of the Strait of Hormuz.

It continued the downward trend from the more-than-three-year high of 7.2 percent in April amid the war in the Middle East, which caused global oil price and supply shocks. The inflation rate averaged 4.8 percent for the first semester.

The BSP expects inflation to settle within six to seven percent this year.

While price growth continues to trend downward, the BSP still flagged elevated pressures threatening consumer prices.

“Inflationary pressures remain strong,” the BSP said in a statement on Tuesday, July 7. “Global oil and fertilizer prices remained elevated in June and continue to drive domestic fuel and food prices.”

It also bears noting that core inflation, which strips away consumer basket items with volatile prices, jumped to 4.4 percent from 4.1 percent in the previous month. It accelerated to twice the 2.2 percent recorded in June 2025.

“Rising core inflation indicates broadening price pressures and second-round effects, including higher inflation expectations,” the BSP said.

For the months ahead, the BSP expects inflation to remain on an upward trend, with the 2026 print seen averaging 6.4 percent and 4.5 percent for 2027, both of which would breach the four-percent upper ceiling of the BSP’s tolerance range.

It said recent macroeconomic developments, “especially in the international oil market,” will be monitored closely and factored into the August policy meeting.

“The Monetary Board (MB) will continue to be guided by incoming data and is prepared to take further monetary action as needed to ensure that inflation returns to the three-percent target,” the BSP said.

BSP Governor Eli M. Remolona Jr. said earlier that the Philippine economy retains the capacity to absorb further monetary tightening. This comes even as the country navigates a prolonged growth slowdown that has persisted since late 2025.

Remolona said a potential 25-basis-point (bp) interest rate adjustment remains highly manageable because current nominal rates are low once adjusted for inflation. The benchmark rate has so far been lifted by a cumulative 50 bps to 4.75 percent in June.

Citing broader price pressures, Chinabank continues to expect the BSP “to deliver one more rate hike in August.” A minimum quarter-point hike would bring the benchmark rate to five percent.

“Substantial upside risks to the inflation outlook continue to persist,” which could keep the monetary authorities on a hawkish footing, Chinabank said.

For one, El Niño is seen driving up food costs, particularly rice prices, as well as energy costs, given that the prolonged dry spell “may disrupt agricultural production as well as strain power supply due to higher electricity demand and reduced hydropower generation.”

A wage hike also risks accelerating price movements as firms “pass on higher labor costs to consumers, and rising incomes support stronger consumption.”