Inflation Picks Up In May, But Still Within BSP’s Target

Inflation Picks Up In May, But Still Within BSP’s Target

After a downward trend since the start of the year, food and utility cost has picked up again in May. It settled at 3.2 percent from 3 percent in April. The good news is, it’s still within the target range of Bangko Sentral ng Pilipinas (BSP) which is 2-4 percent.

According to the Philippine Statistics Authority, food and non-alcoholic drinks prices rose sharply last month, led by fruits, vegetables, and fish. Transport prices had the biggest jump, hitting 3.5 percent. An earlier memo from BSP has warned against the effect of a jeepney fare hike, saying it would push up inflation further. Meanwhile, some items remained steady in May, these are health, communication, clothing, and recreation expenses.

Despite defying the downward trend in May, experts believe that the inflation rate will return to its deceleration mode in the coming months. Adequate rice supply due to larger imports and higher harvest during the summer is expected to further ease the inflation rate in the coming months since rice accounts for around 10 percent of the inflation index. Possible reduction in the Federal Reserve’s key rates this year is also a plus on the BSP policy rates.

An economic research firm also traced back the higher inflation rate last month to El Niño, and as we transition to the wet season, there will be weaker demand pressures and a high base effect will likely keep annual inflation in check.

Relatively, an economist from ING Bank Manila said food inflation will be a key factor in the country’ headline inflation for the remainder of the year but believes the final numbers will still remain within government’s target.

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