Economists and financial market analysts believe inflation last month settled within 3.7 to 4.6 percent due to higher prices of basic commodities.

The lower end of the forecast range is the same level recorded in June by the Philippine Statistics Authority (PSA).

Security Bank chief economist Dan Roces said the July inflation could have hit 4.2 percent or within 3.7 to 4.5 percent.

“For July, higher electricity rates, elevated agricultural commodity prices, and increased domestic oil costs drove inflation,” he said.

However, Roces added the rise in inflation could be tempered by cheaper rice and fruits and imported goods due to a stronger peso against the US dollar recently.

Rice prices

Based on annual growth, the PSA found rice prices declined to 22.5 percent in June from 23 percent in May, following government measures to mitigate the impact of El Niño on farmers.

PSA data showed rice contributed 5.2 percentage points to food inflation and 2 percent to overall inflation in June.

However, Union Bank of the Philippines chief economist Ruben Carlo Asuncion said July inflation could hit 4.6 percent also due to higher prices of vegetables.

After rice, vegetables were the second biggest contributor to food inflation in June with 0.5 percentage point.

Despite the recent floods from typhoon “Carina,” Asuncion said the impact on agricultural goods will likely be excluded in the July data.

“From experience and the survey methodology employed by the PSA, the impact of super typhoon “Carina” on headline inflation may have yet to register and is expected to be seen in an early August survey,” he said.

Electricity rates

Asuncion also agreed that electricity rates likely contributed to a higher overall inflation as power rates increased by 3.7 percent year-on-year compared to June’s decline of 20.6 percent from a year ago.

Given the recent increases in certain food items, Jonathan Ravelas, a senior advisor at Reyes Tacandong & Co., said July inflation likely rose slightly to 3.9 percent.

Meanwhile, the Bangko Sentral ng Pilipinas projects the latest inflation to settle within 4 to 4.8 percent. It aims to stabilize inflation within 2 to 4 percent.

Roces expects possible higher inflation to return to the BSP target in August as the government and businesses deal with the temporary effects of typhoon “Carina.”

The PSA will release data on July inflation on Tuesday.