Philippine Inflation Just Hit Its Lowest Level Since 2019. But Are Filipinos Better Off?

Inflation in the country, or the rate at which the prices of goods and services go up, rose to its slowest since 2019 in July at 0.9 percent as global rice prices went down that period. Will this make it easier for Filipinos to cope with spiraling prices?

Based on data from the Philippine Statistics Authority (PSA), the consumer price index eased to 0.9 percent that month, the lowest since the 0.8 percent posted in October 2019 and 1.4 percent from a month earlier.

Bangko Sentral ng Pilipinas (BSP) Governor Eli Remolona has said the Philippine central bank was on track to further cut its key interest rate of 5.25 percent.

During the Monetary Board’s June 19 meeting, the BSP decided to cut the target reverse repurchase rate by 25 basis points (bps) from 5.5 percent, the lowest level in two and a half years. A basis point is used to measure incremental changes in interest rates in connection with financial instruments.

“We welcome the continued slowdown in inflation, which eased to 0.9 percent in July—its lowest level since October 2019,” Special Assistant to the President for Investment and Economic Affairs Frederick Go said, reacting to the development. “Food prices, in particular, fell by 0.5 percent, bringing much-needed relief to Filipino households. These developments underscore the administration's commitment to making food more accessible and affordable.”

Go added that economic team will continue to pursue measures to keep prices stable to "make everyday life easier for every Filipino."

Experts have attributed the July inflation slowdown party to the quicker yearly decline in rice prices, which dropped to 15.9 percent from 14.3 percent a month earlier. The PSA said the trend of lower rice inflation is likely to continue across the next few months.

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“Inflation easing to 0.9 percent in July is encouraging yet requires further diagnosis, driven by stable food and energy prices,” Philippine Institute for Development Studies senior research fellow John Paolo Rivera told Esquire Philippines in an interview. “To sustain this, the national government should boost food production, ensure supply chain efficiency, and guard against global price shocks.”

He noted that lower inflation does not necessarily mean economic stability for the country, citing the need to keep an eye on signs of slowing demand from consumers due to low income and purchasing power.

According to the local statistics agency, core inflation, which does not include volatile food and energy prices, slightly quickened to 2.3 percent in July from 2.2 percent a month earlier.

The average inflation consumer price index rate in the seven-month period stood at 1.7 percent, which was below the BSP’s target of 2.0 percent to 4.0 percent for the year.

“Despite the numerous decreases in policy rates, aggregate demand is not changing,” Leonardo Lanzona, who teaches economics at the Ateneo de Manila University, said in an online exchange. “This inflation is actually lower than the average of three to four percent before the pandemic, when the economy was operating at an optimal level (due mainly to the efforts of the Aquino administration),” he added, noting that the economy may be experiencing a substantial economic deceleration.

Lanzona stressed that despite more stable prices, Filipinos are not necessarily better off considering their low incomes.

Manila’s economic managers are expecting the Philippine economy to grow by 5.5 to 6.5 percent this year, which is lower than its previous target of six to eight percent due to “heightened global uncertainties."

In the first quarter of the year, the Philippine economy grew by 5.4 percent, a tad lower than the 5.9 percent growth posted a year earlier.

“The government, and the Bangko Sentral ng Pilipinas, should be more concerned now about the slowing economic growth (down to 5.5 percent from the targeted 6.0 - 8.0 percent) and the Trump tariffs, instead of inflation,” Calixto Chikiamco, founder of the Foundation for Economic Freedom, also told Esquire Philippines in an interview. “In the light of the low inflation numbers for several months now, the BSP should aggressively lower interest rates and keep the peso weak.”

The economist earlier floated the idea of the national government allowing the peso to weaken against the dollar to offset the effects of US trade policies and improve competitiveness to make exports cheaper to US buyers.

After his meeting with US President Donald Trump last month, Philippine President Ferdinand “Bongbong” Marcos, Jr said the White House agreed to a 19 percent tariff rate on Manila’s exports to the US from the previously imposed 20 percent, a week before the trade negotiation deadline.

Earlier last month, Trump imposed a 20 percent tariff rate on Philippine products from the previously 17 percent in a new round of tariffs. The Philippines currently imposes a 24 percent duty rate on US goods. According to estimates made by US trade officials.

The US President had described his Philippine counterpart as a “very good, and tough negotiator” on account of the tariff scheme talks.

“A weak peso will stimulate spending by OFW families, help exporters overcome the high cost of Trump tariffs, boost tourism and mining, help BPOs overcome the threat of AI, protect local industry from dumping of cheap foreign goods…” Chikiamco said, adding that it would also make doing business in the Philippines more attractive due to cheaper costs.

The Development Budget Coordination Committee, which consists of the country’s economic managers, also assumed that foreign exchange would “remain stable” and average at P56 to P58 to the dollar until 2028.

“July’s inflation cooling to just 0.9 percent is a big win for Filipino households,” Jonathan Ravelas, Reyes Tacandong & Co. senior advisor, said in a Viber message. “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). But let’s not get too comfy—core inflation’s still above two percent, so the fundamentals need watching."