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'Inflation in July likely hit 2.3%'.

LOCAL inflation is likely to have decelerated further to 2-percent territory, as various factors align for the tamer prices of consumer goods and services in July, a local economist said.

Security Bank AVP and chief economist Robert Dan Roces said inflation likely hit 2.3 percent in July this year-continuing its deceleration path after being disrupted by a one-off blip in May.

Inflation started decelerating in November from its 6.7-percent peak in 2018. This deceleration trend was snapped in May this year, as inflation rose from 3 percent in the previous month to 3.2 percent. In June, inflation went back to decline mode to 2.7 percent.

Roces said inflation will continue its deceleration trend in July, mainly because base effects from last year's high base will start to kick in.

The Security Bank economist discussed in his inflation commentary that in the heavily weighted food and nonalcoholic beverages index, there was an observed downtrend in prices from last month.

'The restrictions and resulting supply pressures in pork imports from African swine flu [ASF] high-risk countries might not have affected the index as much when these were offset by lower prices in other major foodstuffs, notably rice,' he said.

Roces also noted that electricity prices have gone down, as Meralco slashed rates by around P0.107 per kilowatt-hour (kWh) in July, or a downward adjustment of P0.57 per kWh from May on the back of lower transmission charges for residential consumers.

Moreover, pump prices of gasoline went down with falling global prices due to fears of weakening demand and supply surplus, he noted.

Adding to those factors are the benefits of a strong peso throughout the month, which made imported raw materials cheaper to buy.

According to data from the Bangko Sentral ng Pilipinas (BSP), the local currency averaged at 51.155 to a dollar in July. This is more than half a peso stronger compared to the 51.803 average value of the peso against the dollar in the previous month.

In their most recent monetary-policy meeting, the Monetary Board said they see a further moderation of inflation pressures toward the end of the year as reflected in their new inflation forecasts. In particular, they announced that they have scaled down their inflation forecasts to 2.7 percent on average for 2019 from the 2.9-percent projection made in May.

For 2020, the projection was also scaled down to 3 percent from the 3.1 percent in the previous meeting. The BSP is set to meet on August 8 to review their monetary-policy settings, along with their inflation forecasts for this year and the next.

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Publication:Business Mirror (Makati City, Philippines)
Date:Jul 30, 2019
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