Headline Inflation Overshoots, Clouding BSP Outlook

Core price pressures eased further to 2.9% y/y, from 3.1% in June. Still, headline prices rebounded.

• Having ticked down in June, today’s CPI yoy print of 4.4% was ahead of the prior months and beating expectations (4.1%). This is outside the BSP' 2-4% target band.
• Part of this likely reflected base effects with the 2023 July outcome marking a trough point before y/y momentum re-accelerated in Q3 last year. Through Q4 last year, inflation momentum then resumed its deceleration trend.
• More broadly though, with this week’s GDP print (out on Thursday) likely showing that the Philippines economy may be bucking regional trends and continuing to expand, it was no surprise to see the CPI number higher.
• In recent years, Philippines inflation has overshot, and today’s numbers shows that inflationary pressures remain and that the Central Bank’s rate rises may not have sufficiently fed through to the broader economy just yet.
• Recent rhetoric from the BSP has sounded a little more balanced as well. BSP Governor Remolona stating yesterday rates could remain on hold , with a rate cut possible if price pressures continue to ease (see this link). After today's print the central bank may want more evidence of such trends.