Inflation, or the rate of change in prices, continues to smash forecasts as it accelerated for the sixth straight month in June, breaching the forecast at 5.2 percent and the highest since October 2011, the Philippine Statistics Authority (PSA) yesterday said.

The acceleration was traced to the 6.1 percent increase in prices of non-alcoholic drinks and to such other factors as the rise of alcoholic drinks, tobacco, water, electricity and fuel prices over the past few months.

The headline inflation was also faster than the 4.3 to 5.1 percent forecast earlier by the Bangko Sentral ng Pilipinas (BSP) and the 4.9 percent outlook of the Department of Finance (DoF).

Trade analysts said the fast-rising inflation adds pressure on the BSP to raise interest rates for a third time this year that follows the total 50-basis point hikes since May.

For Joey Cuyegkeng, senior economist at the Manila unit of the Dutch financial services giant ING Group, the accelerating inflation in June would “likely require further monetary response as early as the August meeting.”

This pertains to the recalibration of the monetary policy settings every six weeks when the seven-man Monetary Board makes the appropriate adjustments based on the data at hand.

Cuyegkeng said the real policy rate, or the policy rate after allowing for inflation, “is deeper in the red, indicating that a more aggressive economic policy response would be needed” than that allowed by the BSP at present.

He particularly said the real policy rate at present is at minus 1.7 percent versus only minus 0.4 percent in January.

BSP Governor Nestor Espenilla acknowledged the acceleration was a setback for the Philippines and vowed to look into the forecast inflation path.

“The higher-than-expected June inflation outcome is a setback. We will review and update our situational assessment and forecast inflation path,” Espenilla said in a statement.

“This will shape the strength and timing of our next monetary policy response to firmly anchor inflation expectations. The BSP reaffirms its strong commitment to ensure that inflation returns to within the 2-4 percent target range as soon as possible,” he quickly added.

The rise in consumer prices was also the fourth straight month that inflation breached the ceiling of the BSP’s 2 to 4 percent target for the full year.

“It was primarily brought about by higher annual rate posted in the heavily-weighted food and non-alcoholic beverages index at 6.1 percent,” the PSA said of the outcome of the latest survey on prices.

For food items alone, the index went up to 5.8 percent in June due to higher prices of corn with inflation rate of 14.1 percent; vegetables, 8.6 percent; meat, 5 percent; and rice, 4.7 percent, the agency added.

Rising inflation is generally unwelcome due to its corrosive impact on the purchasing power of the consumer. In this case, one peso in the hands of a consumer could buy 5.2 centavos fewer services or goods at present compared to a month ago.

Likewise, rising inflation acts as a disincentive to savers who may now be encouraged to spend what they have instead of safely deploying them in the form of investments and other productive endeavors.

An analysis conducted by Ateneo School of Government Dean Ronald Mendoza and economist Ayn Torres also warned of higher prices resulting to “shrinkflation” where manufacturers deliberately decrease the size of their goods to keep prices the same.

As a result of buoyant prices, the year-to-date inflation averages 4.3 percent or well above 4-percent ceiling set earlier by the BSP.

Nevertheless, Socioeconomic Planning Secretary Ernesto Pernia counts on the inflation to normalize and approximate the target range towards the end of the year after after hitting the peak in the July-to-September quarter.

“We expect inflation to peak in the third quarter and taper off by October. The government needs to implement necessary measures, both short-term and long-term, to address the impact of inflation,” Pernia said in a news briefing on Thursday.

Pernia attributed the higher June inflation to faster price increases in major commodities like food, fuel and transport, as well as world oil prices, the peso depreciation, and price of rice.

“We hope it’s the peak. We are hoping that it will plateau,” he said.

“The world price of oil is beginning to soften and the rice tariffication law will be passed.”

The country’s chief economic planner underscored the need for the country to urgently increase the supply of goods and services, especially food, and particularly rice, which takes up a large chunk of the food budget of poor families.