Softer food and utility prices offset elevated transport costs in August, pulling Philippine headline inflation to its slowest pace in five months, the Philippine Statistics Authority (PSA) said on Friday.

Headline inflation, as measured by the consumer price index, eased to 6.1% in August from 6.2% in July, though it was well above the 1.5% recorded a year earlier. The August reading was the weakest since the 4.1% posted in March.
The result fell within the central bank's 5.5%-6.5% forecast range for the month but came in slightly faster than the 6% median estimate of 20 analysts polled by BusinessWorld.

August nonetheless marked the sixth consecutive month that headline inflation settled above the Bangko Sentral ng Pilipinas' (BSP) 3% target — the midpoint of its 2%-4% policy band — meaning prices continued to rise faster than the pace the central bank deems consistent with stable economic growth. In the eight months to August, inflation averaged 5.2%.

The cooler print was largely driven by slower inflation in food and electricity, National Statistician Claire Dennis S. Mapa said.

"Lower food inflation and slower increases in housing, water, electricity, gas, and other fuels helped ease overall price pressures during the month," the Department of Economy, Planning, and Development (DEPDev) said in a separate statement.

Food and Rice

Food inflation eased to 4.6% in August from 5.2% in July as falling vegetable and seafood prices offset an uptick in rice inflation, Mr. Mapa said. It was the slowest food inflation since the 2.9% recorded in March.

Vegetable inflation swung to -3.4% from 8.4% in July, while inflation for fish and other seafood eased to 6.6% from 7.8%.

"Overall food inflation went down amid a more stable domestic supply, driven by the decline in vegetable prices and the slowdown in inflation for fish," the central bank said in a statement. "By contrast, rice inflation accelerated, partly due to higher logistics costs."

Rice, a staple that accounts for a significant share of the food budget of Filipino households, saw prices rise significantly, pushing rice inflation to an over two-year high of 19.4% from 17.1% in July — the fastest since the 20.9% of July 2024.

In the second half of August, regular milled rice sold for an average of P49.61 per kilo, up 22.95% year on year from P40.35 and 0.63% higher than P49.3 per kilo a month earlier. Well-milled rice climbed to P56.29 per kilo, up 19.59% from P47.07 last year and 1.08% month on month from P55.69.

"While the overall figure remained stable, the moderation in key drivers such as food inflation gives us confidence that we are moving in the right direction," DEPDev Secretary Arsenio M. Balisacan said.

Utilities and Transport

Inflation for housing, water, electricity, gas and other fuels eased to 7.9% in August from 8.2%, as electricity inflation slowed to 14.4% from July's revised 16.9%.

Last month, the Manila Electric Co. cut electricity rates by 4.28 centavos per kilowatt-hour (kWh) to P14.7833 from P14.8261 per kWh. Households consuming 200 kWh monthly paid P9 less on their total electricity bill as a result.

Mr. Mapa noted that softer food inflation tempered the impact of higher transport costs on the headline figure.

"So, the (inflation for the) items that declined, for example, as I mentioned earlier, in the food basket, there were components that went down, such as meat and vegetables. These declines somewhat compensated for the upward movement in transport costs," he told a press briefing in mixed English and Filipino.

Transport inflation accelerated to 13.5% in August from 11.9% in July.

Retail fuel prices remained above the pre-war range of P50 to P60 per liter. At end-August, gasoline cost between P64.20 and P96.57 per liter, diesel between P77 and P100.84 per liter, and kerosene between P99.10 and P133.32 per liter, according to Department of Energy data — even though gasoline prices were trimmed by as much as P2.20 per liter in August and kerosene by up to P0.99 per liter, while diesel rose by as much as P0.61 per liter.

Core inflation, which excludes volatile food and oil prices, cooled for a second straight month to 4.1% from 4.2% in July, though still faster than the 2.7% of August 2025.

Inflation in the National Capital Region slowed to 4.1% from 4.4% in July, but quickened from 2.9% a year ago. Outside NCR, inflation eased to 6.6% from 6.7%, accelerating from 1.1% a year earlier.

Inflation for the bottom 30% of income households held steady at July's 8.2% pace, though this accelerated sharply from -0.6% last year. As of August, it averaged 6.2% — a sign that price pressures have been falling hardest on poorer Filipinos, whose spending is concentrated on food and other essentials.

Bad Weather Seen Driving Prices Higher

While food prices have eased for now, consumers may face increases this month as bad weather disrupts local agricultural production, Mr. Mapa said.

"Although vegetable prices in August posted negative inflation due to declines in some items, other components still rose. So, we expect some change in movement for the month of September," the national statistician said.

According to the Philippine Atmospheric, Geophysical and Astronomical Services Administration (PAGASA), two to three tropical cyclones may enter or form within the Philippine Area of Responsibility this month.

The BSP earlier said inflation will likely peak in the fourth quarter of this year as the impact of the "super El Niño" feeds into food prices. PAGASA said the country may encounter a "strong" El Niño season from September to November, which could intensify into a "very strong" one between October and January next year.

Weather disruptions from the severe El Niño could fracture local production, particularly of rice, although government intervention could also influence price movements, Mr. Mapa noted.

Metropolitan Bank & Trust Co. Chief Economist Nicholas Antonio T. Mapa said the August figures justified the BSP's measured approach to monetary policy.

"BSP remains vindicated for carrying out measured tightening to balance out fulfilling the price stability mandate while still providing much needed support to a challenging growth environment," he said in a Viber message.

Chinabank Research said the BSP's cumulative hikes since April may suffice to tackle emerging inflationary pressures, leaving limited room for further tightening.

"Despite the expected pickup, we see limited scope for another rate hike, as the BSP's pre-emptive 25-bp (basis point) hike in August, bringing the total increase in this hiking cycle to 75 bps, should help address emerging upside risks and keep inflation expectations anchored," it said in a note.

The BSP said on Friday it will keep a close watch on developments surrounding the Middle East war and weather disturbances. "Going forward, the BSP will remain guided by incoming data and its assessment of risks to the inflation outlook," it added.

At its August meeting, the Monetary Board tightened for a third straight time, seeking to preemptively contain inflation risks from the looming severe El Niño, a potential wage hike, and volatile global oil prices. It raised its benchmark interest rate by 25 bps to an over one-year high of 5%, bringing total hikes to 75 bps since tightening began in April.

BSP Governor Eli M. Remolona, Jr. said policymakers hope they will not need to hike further, but left the door open to additional tightening as needed to bring inflation closer to the 3% target.

The BSP expects inflation to remain above target over the next three years: 6.1% in 2026, 5.4% in 2027, and 3.3% in 2028.

Peso Pressure

Ser Percival K. Peña-Reyes, senior research fellow at the Ateneo Center for Economic Research and Development, sees scope for one more rate hike before yearend, citing the negative real policy rate and looming inflation risks.

"Even with the benchmark rate at 5.0%, the real policy rate remains negative because headline inflation (6.1%) sits significantly higher," he said in a Facebook post. "Economists note that negative real interest rates can inadvertently sustain high demand and discourage savings when the economy actually needs cooling."

The weakening peso may also prompt the central bank to tighten later this year to contain import-tied inflationary pressures, Mr. Peña-Reyes added.

"When local interest rates do not offer high enough yields relative to global markets, capital outflows increase," he said. "The BSP may feel forced to deploy another preemptive hike to stabilize the currency and prevent imported inflation from climbing."

According to Chinabank Research, every P1 depreciation of the peso against the dollar adds roughly 0.03 percentage point to inflation through imported goods.

The peso breached the P62-a-dollar level for the first time last month, averaging P61.3281 against the greenback in August — about 7.1%, or P4.0756, weaker than P57.2525 a year earlier. On Wednesday, the currency fell 16.5 centavos to close at an all-time low of P62.565 per dollar, breaking its previous record low of P62.4 set on Tuesday, according to Bankers Association of the Philippines data.

By Katherine K. Chan, Reporter