Headline inflation slowed further to 0.9 percent in July, the lowest since October 2019, helped by declining food and power prices and by high base effects from last year’s elevated commodity costs, data from the Philippine Statistics Authority (PSA) showed on Tuesday.
The slowdown in July marks the fourth straight month of easing inflation, with the rate staying well below the Bangko Sentral ng Pilipinas’ (BSP) 2–4 percent target range.
The rate in July eased from 1.4 percent in June.
The comparative year-earlier rate was much higher at 4.4 percent in July 2024.
The downtrend in the overall inflation was primarily brought about by the slower annual increase in the housing, water, electricity, gas and other fuels index at 2.1 percent during the month, from 3.2 percent in June, National Statistician Claire Dennis Mapa said in the report released by the PSA.
He said the annual decrease in the index of food and non-alcoholic beverage at 0.2 percent during the month in review from an annual increase of 0.4 percent a year earlier, also contributed to the slowdown in July.
The PSA said the main contributors to the continued downtrend were the 0.5-percent decline in food prices, particularly rice, vegetables, and fruits, as well as slower annual increases in electricity rates, education services and personal care items.
Other commodity groups
Other commodity groups that posted slower inflation rates during the month were education services, down at 4.3 percent from 5.3 percent, and personal care and miscellaneous goods and services, down at 2.3 percent from 2.4 percent.
Meanwhile, faster annual increases were observed in the following groups:
• Alcoholic beverages and tobacco, 4.2 percent from 3.8 percent
• Clothing and footwear, 1.8 percent from 1.7 percent
• Health, 2.6 percent from 2.4 percent
• Information and communication, 0.5 percent from 0.4 percent
• Restaurants and accommodation services, 2.3 percent from 2.1 percent
The rest of the commodity groups retained their previous month’s annual growth rates.
Warning vs complacency
But while the headline number is at a six-year low, authorities and analysts alike warned against complacency — with wage hikes, typhoon-related supply disruptions, and global geopolitical risks looming as potential inflationary pressures in the coming months.
“The continued slowdown in inflation, and food prices in particular, brought much-needed relief to Filipino households,” Secretary Frederick Go, special assistant to the president on economic and investment affairs, said. “These developments underscore the administration’s commitment to making food more accessible and affordable.”
He added: “We desire for the people to feel in their homes the fruits of our economic development.”
Private economists shared the government’s optimism but pointed to possible headwinds ahead.
A big win
Jonathan Ravelas, managing director at eManagement for Business and Marketing Services, described July’s inflation drop as “a big win for Filipino households.”
“It’s the lowest in nearly six years, driven by cheaper rice and lower power rates. That means more breathing room for families and a bit of relief at the palengke (market),” Ravelas said. “But let’s not get too comfy — core inflation is still above 2 percent, so the fundamentals need watching.”
Core inflation, which excludes selected food and energy items, edged up to 2.3 percent in July from 2.2 percent in June, the PSA said.It was still lower than the 2.9 percent recorded in July 2024.
Headline inflation still eased to 0.9 percent year-on-year in July 2025, despite the series of storms and floods in some parts of the country, said Michael Ricafort, chief economist at RCBC.
Favorable base effects
Ricafort explained that supply shocks tied to recent typhoons caused short-term spikes in agricultural prices, though the overall trend remained downward due to favorable base effects, improved rice supply, and the end of El Niño.
He noted that rice tariffs were lowered from 35 percent to 15 percent in July 2024, helping temper domestic prices.
Looking ahead, Ricafort said the recent P50 increase in Metro Manila’s daily minimum wage may lead to higher prices of goods and services, depending on how businesses adjust.
He also flagged global uncertainties, including the impact of Trump-era tariffs, US monetary policy, and tensions in the Middle East, as potential influences on inflation and growth.
“Nevertheless, the relatively benign inflation at 1 percent to 2 percent levels is still possible for the rest of 2025, provided there are no major supply shocks, large typhoons, or oil price spikes,” Ricafort said. “This creates room for the BSP to deliver rate cuts aligned with expected US Fed easing.”
Back above 1% soon
“We expect headline inflation to rise gradually in the coming months, with the year-on-year rate returning above 1 percent starting August. This is partly due to lingering effects of recent storms, which are pushing food prices back into positive territory.
The proposed rice tariff hike — from 15 percent to 35 percent — if approved this month, would further add to inflationary pressure.
We maintain our full-year 2025 CPI forecast at 1.9 percent, with Q3 and Q4 estimates at 1.5 percent and 2.3 percent, respectively.
“Upside risks remain, including more frequent weather disturbances, global supply chain disruptions from tariff hikes, and oil price shocks linked to rising tensions in the Middle East and possible new US sanctions on Russia,” Security Bank added.
Vigilance required
The Philippine Chamber of Commerce and Industry (PCCI) echoed this sentiment, welcoming the lower inflation print while urging sustained efforts to shield the economy from external shocks.
“Sustaining this low inflation environment will require vigilance against supply shocks, particularly in food, energy, and transport,” said PCCI president Enunina Mangio. “The slowdown in price increases provides much-needed relief to both consumers and enterprises, especially MSMEs that have been navigating cost pressures over the past few years.”
The business group noted that inflation’s easing could strengthen purchasing power, consumer confidence, and domestic demand, while also improving the credit environment.
“With inflation below the 2 to 3 percent target of the government, this may also lead to monetary easing. Businesses could benefit from lower borrowing costs for expansion or capital expenditure,” Mangio said.
Analysts widely expect the BSP to consider a 25-basis-point rate cut at its next policy meeting on August 28, with BSP Governor Eli Remolona and Finance Secretary Ralph Recto both signaling that up to 50 bps of rate cuts remain on the table for the rest of 2025. – With reports from Ruelle Casto and Irma Isip
