Inflation eased for the second consecutive month in June, declining to 6.4 percent from 6.8 percent in May, falling within the Bangko Sentral ng Pilipinas’ (BSP) forecast range for the first time since the onset of the Middle East conflict in March.

The Philippine Statistics Authority (PSA) reported on Tuesday morning that the downtrend in overall inflation in June 2026 was primarily driven by the slower annual increase in the transport index, which rose 12.8 percent during the month from 16.2 percent in May 2026.

Also contributing to the moderation in inflation were slower annual growth rates in the indices of food and non-alcoholic beverages, which eased to 5.2 percent in June 2026 from 5.7 percent in May 2026, and furnishings, household equipment and routine household maintenance, which slowed to 3.7 percent from 3.9 percent in the previous month.

The June print remains significantly higher, however, than the 1.4 percent recorded in the same month a year earlier. The figure also falls squarely within the BSP’s projected range of 6.0 percent to 7.0 percent for the month.

Volatility in global oil prices resulting from the Middle East conflict may have contributed to the central bank missing its previous three monthly forecasts. Despite inflation easing for two consecutive months after reaching a three-year high of 7.2 percent in April, the BSP cautioned that upside inflationary risks persist.

“Global oil and fertilizer prices remain elevated in June and continue to drive domestic fuel and food prices,” the BSP said in a statement.

The PSA reported that core inflation, which excludes volatile items such as food and energy, accelerated to 4.4 percent in June from 4.1 percent in May. The BSP said this indicates broadening price pressures, second-round effects and higher inflation expectations.

The BSP raised its key policy rate in April and June in response to the inflationary impact of the Gulf energy shock, bringing cumulative rate increases in 2026 to 50 basis points. The move effectively reversed the last two rate cuts implemented to support economic growth following the infrastructure scandal.

BSP Governor and Monetary Board Chairman Eli M. Remolona Jr. told reporters last Friday that the upcoming El Niño season, as well as the Middle East conflict — which remains unresolved despite ongoing discussions of a possible settlement — remain at the forefront of the central bank’s monitoring efforts.

“This energy shock, maybe it's over, we don't know. There’s a possibility of an upcoming El Niño shock. We're also monitoring the movement of inflation expectations — it’s quite different from before,” he said in Filipino.

Remolona described the current energy shock as “unusual,” adding that the BSP will closely watch the June inflation print as a key input for the Monetary Board’s next policy meeting in August.

The PSA said average headline inflation for the first six months of 2026 stood at 4.8 percent, significantly higher than the 1.8-percent average recorded in the first half of last year. Meanwhile, the BSP said it will continue to monitor recent developments, particularly in the international oil market, and consider these factors in its next policy meeting.

The central bank expects inflation to remain above its annual 3 percent target over the next three years.