July CPI Shows Decent Core Y/Y Downshift, But BSP Sees Risks To The Outlook Leaning To The Upside

July headline inflation came in slightly softer than the market consensus, printing at 4.7%y/y (4.9% projected and 5.4% prior). It was within the BSP's range estimate as well, albeit slightly at the upper end of the projected range (4.1% -4.9%).

• The m/m print was 0.1%, versus 0.2% in June, with food +0.5% the highest m/m gain, while housing/utilities continue to fall (-0.8%).
• From a y/y momentum standpoint, only one category saw stronger y/y pace, which was education (+3.7% y/y from 3.6%). The rest of the sub-components saw either the same y/y momentum or a further deceleration. Transport fell to -4.7%, which remains a noticeable drag.
• Core inflation was 6.7% y/y, versus 7.4% prior. Base effects are favorable as we progress further into H2. Likewise for headline inflation.
• The BSP stated after the data that the balance of risks to the inflation outlook lean towards the upside. Citing transport fare hikes, minimum wage adjustments and food supply constraints. The central bank is ready to adjust policy if needed (see this link). This echoes comments from BSP head Remolona (see this link)
• Finance Secretary Diokno was a little more dovish in comments, stating that the Philippines is over the inflation hump and the July data supports a return to the inflation target in Q4.