Inflation slows to 6.8 percent but poor face 8.4 percent

By Francis Allan L. Angelo

Philippine headline inflation cooled to 6.8 percent in May 2026, but the country’s poorest households barely felt the relief as their cost of living remained stubbornly high at 8.4 percent.

While cheaper fuel pulled the headline figure down from the 7.2 percent recorded in April, a quiet uptick in core inflation from 3.9 percent to 4.1 percent reveals that underlying economic price pressures are still broadening.

A temporary drop in global oil prices helped slow overall transport costs, but elevated rice prices continue to anchor the high cost of daily living for Filipino families.

May offered a brief reprieve by falling below market expectations and the central bank’s forecast range of 7.1 percent to 7.9 percent, but monetary authorities are already warning of an elevated path breaching the target through 2027.

The Philippine Statistics Authority announced on Friday that continued government interventions under the administration of President Ferdinand R. Marcos Jr. helped temper these macroeconomic pressures.

PSA Undersecretary and National Statistician Claire Dennis S. Mapa stated that the slower monthly inflation rate was primarily driven by a deceleration in transport costs, food prices, and housing-related expenses.

Mapa reported that the country’s average inflation rate from January to May 2026 stood at 4.5 percent.

This five-month average remains notably higher than the Bangko Sentral ng Pilipinas target of 3.0 percent for the entire year.

According to the PSA, transport inflation slowed down to 16.2 percent in May and accounted for 70.3 percent of the overall decline in inflation.

This significant deceleration in the transport sector was largely due to slower increases in the domestic prices of diesel and gasoline.

Food and non-alcoholic beverages also contributed to the easing of inflation, posting a 5.7 percent inflation rate and accounting for 16.9 percent of the overall slowdown.

The lower inflation in the food sector was attributed to slower price increases in vegetables, tubers, cooking bananas, onions, and fish products like milkfish.

Additionally, improved domestic supply conditions drove a continued decline in meat prices, particularly pork.

Housing, water, electricity, gas, and other fuels recorded a 7.8 percent inflation rate and contributed 12.8 percent to the overall monthly deceleration.

This utility slowdown was supported by slower price increases in liquefied petroleum gas, house rentals, and kerosene, alongside the suspension of excise taxes on LPG and kerosene.

Despite the positive monthly slowdown, food and non-alcoholic beverages remained the largest overall contributor to national inflation, accounting for a 32.7 percent share.

This heavy food category weight was led primarily by cereals and cereal products, particularly rice.

Housing, water, electricity, gas, and other fuels ranked as the second-largest contributor to national inflation with a 24 percent share.

Transport expenses placed third overall, commanding a 21.9 percent share of the national inflation rate.

The PSA summarized that rice, fish, vegetables, fuel, electricity, and housing rentals remained among the major contributors to inflation in May, even though their rates of increase slowed from the previous month.

On a month-on-month seasonally adjusted basis, headline inflation declined significantly from 3.0 percent in April to -0.6 percent in May.

Looking ahead to the coming weeks, economic officials warn that commodity and energy risks remain persistent.

“Moving forward to June, of course there are risks, there is slight [external] volatility on our fuel prices, although prices have gone down on the first week. But we will continue to monitor,” Mapa told a media briefing.

The PSA is also closely monitoring food prices this month after food emerged as a key driver of inflation in May.

Mapa noted that these factors are “Also affecting the energy for the housing, water, electricity, gas, and other fuels, and food prices, particularly rice.”

The Department of Economy, Planning, and Development stated that targeted government measures successfully relieved some upward pressure from elevated global oil prices.

“While global oil prices remain elevated, transport inflation has begun to slow down. The government’s timely and targeted interventions help mitigate the impact of external shocks on Filipino households. This underscores the importance of maintaining responsive and coordinated policies that protect consumers while safeguarding economic stability,” DEPDev Secretary Arsenio M. Balisacan said in a news release.

The DEPDev explained that specific measures to stabilize transport costs included fuel assistance for public utility vehicle operators and drivers, alongside efforts to ensure an adequate national fuel supply.

Balisacan affirmed that the government will continue to implement timely, efficient, and targeted measures to further stabilize prices and protect the purchasing power of consumers.

These future steps include expanding support for the most vulnerable sectors, procuring fuel to ensure supply reserves, exploring alternative fuel sources, and accelerating the renewable energy transition.

The government also aims to stabilize farmers’ earnings and strengthen agricultural preparedness by reconvening the El Niño Task Force.

This climate response will involve implementing cloud-seeding operations, deploying solar-powered irrigation systems, and rolling out crop diversification programs across the country.

“While the easing of inflation in May is encouraging, we recognize that price pressures remain elevated. Thus, well-targeted government interventions are critical to cushioning the impact of domestic shocks, such as weather disturbances, and external headwinds, such as ongoing geopolitical tensions, while preserving business continuity,” Balisacan said.

“The government, through the UPLIFT Committee, will continue to monitor inflation and pursue measures to strengthen domestic food production, improve logistics and market efficiency, and ensure that vulnerable sectors receive timely support.”

UPLIFT stands for the government’s “Unified Package for Livelihoods, Industry, Food, and Transport” program.

Despite the executive branch’s optimistic interventions, the Bangko Sentral ng Pilipinas maintains a highly cautious outlook on the medium-term inflation path.

The central bank noted that while May’s 6.8 percent print fell below market expectations, the rapidly evolving geopolitical situation in the Middle East still warrants close monitoring.

Central bank projections indicate that the domestic inflation environment continues to be challenging with an elevated path ahead.

Average headline inflation is now explicitly projected to breach the 4.0-percent tolerance ceiling for both 2026 and 2027.

The central bank warned that rising inflation expectations risk de-anchoring from the 3-percent target due to more persistent and broadening price pressures across the economy.

Looking ahead, the Monetary Board announced it will continue to be guided by incoming economic data during its June 2026 monetary policy meeting.

The BSP will reassess the macroeconomic outlook to incorporate the May 2026 consumer price index, the first-quarter 2026 national accounts, and key international developments to ensure price stability.