Inflation for the month of June might show a downside surprise due to easing price pressures in certain food and fuel costs, setting the stage for interest rate cuts in the fourth quarter.
“June inflation is due to come out Friday, and the consensus forecast is that it will remain unchanged from May’s 3.9 percent. However, we expect inflation to print a bit lower than that at 3.7-3.8 percent due to continued declines in the price of some key commodity groups,” Alfred Benjamin R. Garcia, head of research at AP Securities, said in a report.
He highlighted the cooling rice prices in May, noting that transport costs remained stable despite the weakening peso, thanks to easing crude prices.
While volatile currency movements pose a risk, Garcia is optimistic the upcoming inflation print could mark the resumption of “the downtrend in inflation, with rice tariff reductions further reducing rice prices in July.”
“This month would also mark the last month with a low base effect, as we would have a higher base in August. Given this outlook, we believe that the upcoming inflation prints would eventually lay the groundwork for an October rate cut, which may be followed by another one in December,” Garcia said.
