Inflation may have slowed in May, aided by a strong Peso that helped reduce oil prices and a decline in the cost of key food items such as rice.
According to the median forecast of 13 economists surveyed by the Inquirer, the consumer price index (CPI) likely reached 1.3% last month.
If confirmed, the Philippine Statistics Authority’s 5th June report would show a slight decrease from April’s 1.4% CPI reading.
The Bangko Sentral ng Pilipinas (BSP) offered a wider projection, estimating that inflation in May could have ranged from as low as 0.9% to as high as 1.7%. Overall, the forecasts indicate that price growth likely fell below the government's official target range of 2 to 4%.
“A strong Peso and moderating global oil prices have lowered the cost of energy,” said Aris Dacanay, economist at HSBC.
“Food prices, on the other hand, were mixed. Leafy vegetables like cabbages become more expensive, but rice prices continue their decline.
“All in all, headline inflation likely remained flat month on month, with risks tilted to the downside if the prices of other goods and services adjust alongside easing energy prices,” he added.
Whereas Sarah Tan, an economist at Moody’s Analytics, echoed the view that falling food prices were the primary factor behind last month’s disinflation. She projected that the consumer price index (CPI) for May would remain steady at 1.4%.
“Food supply is expected to have improved compared to a year earlier due to better weather conditions, supporting better harvests. This should feed into stable retail price growth,” Tan said.
“As for utilities, power rates were lowered in May, which will provide a relief to households and businesses.”
Another month of mild inflation would reinforce the central bank’s ongoing rate-cutting cycle, which has already brought the benchmark lending rate down to 5.5%.
BSP Governor Eli Remolona Jr. noted there is “plenty of room” for further reductions, indicating that at least two additional rate cuts are likely this year.
The Monetary Board is scheduled to meet on 19th June to review policy settings, a decision made more complex by rising global trade uncertainties tied to the ongoing US trade war.
Metrobank chief economist Nicholas Mapa, who forecast inflation to rise slightly to 1.5% due to higher meat and utility costs, said he expects the BSP to implement up to three more rate cuts this year.
“Despite the slight uptick in the headline figure, inflation is well below the BSP’s inflation target and is forecast to remain target consistent over the policy horizon. As such we believe BSP has a copious amount of space to cut rates and support growth momentum during these challenging times,” Mapa said.