Inflation likely eased further and settled within the 5.8 to 6.6 percent range in May due to the series of rollbacks in fuel prices, according to the Bangko Sentral ng Pilipinas (BSP).
The central bank said the cumulative rollback in the prices of petroleum products, as well as lower poultry and fish prices and electricity rates of various regional power distributors, likely led to lower inflation in May.
On the other hand, higher prices of rice, vegetables and other key food items, as well as the increase in LPG and electricity rates in areas serviced by Manila Electric Co. (Meralco), were the primary sources of upward price pressures for the month.
'Going forward, BSP will continue to monitor developments affecting the outlook for inflation and growth in line with its data-dependent approach to monetary policy formulation,' the central bank said in a statement.
BSP Governor Felipe Medalla earlier told reporters that inflation is rapidly easing year-on-year due to high base effects and is likely to fall within the two to four percent target band as early as September or October
Inflation cooled for three straight months to hit an eight-month low of 6.6 percent in April from 7.6 percent in March. Inflation likely peaked at 8.7 percent last January as it remained above the two to four percent target range for the last 13 months or since April last year.
Inflation averaged 7.9 percent for the first four months of the year and is likely to stay above the target for 18 to 19 months, breaking the previous record of 15 months.
Based on its latest assessment, the Monetary Board lowered its inflation forecasts to 5.5 percent from six percent for this year and to 2.8 percent from 2.9 percent for next year.
Medalla said inflation is likely to fall below two percent in January next year due to high base effects. The last time inflation was below two percent was at 1.6 percent in May 2020.
The inflation downtrend for the past three months and the stronger-than-anticipated gross domestic product (GDP) allowed the BSP Monetary Board to take a prudent pause from its year long tightening cycle by keeping interest rates unchanged last May 18.
Since May last year, the central bank raised key policy rates by 425 basis points to tame inflation and stabilize the peso.
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