BSP sees June inflation still elevated at 6-7%

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July 1, 2026 | 12:00am

MANILA, Philippines — Inflation is expected to remain elevated at six to seven percent in June as higher electricity and vegetables offset softer oil and food costs, the Bangko Sentral ng Pilipinas (BSP) said.

The lower bound of the forecast, if realized, would extend the downtrend from 6.8 percent in May and 7.2 percent in April, after spiking in March when the Middle East war disrupted global fuel supply chains.

Meanwhile, the upper end of the June projection may surpass the previous month’s level and remain well above the BSP’s two to four percent target band.

It is also expected to be sharply higher than the 1.4 percent inflation posted in June 2025.

“The decline of domestic oil prices and the lower prices of major food items, such as rice and meat, may temper inflation for the month,” the BSP said.

Local pump prices are sliding back toward pre-war levels, with diesel and gasoline in some Metro Manila stations now below P70 per liter, a sharp drop from nearly P170 per liter at the height of the US-Iran war.

“However, higher electricity rates and vegetable prices could partly offset these downward price pressures,” it added.

Manila Electric Co. (Meralco) earlier said consumers may see higher power bills in June due to increased generation costs triggered by elevated spot market prices and a weaker peso.

The Bangko Sentral ng Pilipinas (BSP) is likely to extend its tightening cycle and raise borrowing costs to 5.50 percent this year to arrest stubbornly high inflation, according to British banking giant HSBC.

In a commentary, Desmond Kuang, CIO for Asia at HSBC Private Bank and Premier Wealth, said elevated oil prices and the uptick in rice prices have presented an “inflation challenge” for the Philippines and its central bank.

Inflation is projected to accelerate to 6.2 percent in 2026, still above the two to four percent target band, Kuang said.

This followed the inflation reading in May, which cooled to 6.8 percent from 7.2 percent from the previous month.

“We expect the BSP to engage in modest tightening, hiking interest rates to 5.50 percent in 2026 before eventually reducing them to five percent by end-2027,” he said.

In its June meeting, the Monetary Board delivered its second consecutive hike to lift policy rates to 4.75 percent as inflation remained above target and price pressures showed signs of broadening.