Inflation rate will likely average 3.4 percent this year, faster than 1.8 percent in 2016, on the back of higher food prices, ING Bank Manila senior economist Joey Cuyegkeng said in a report Tuesday.
“Food pressures from tight supply conditions are likely to keep food inflation on an uptrend. Energy prices are also expected to exert some upward pressure,” Cuyegkeng said.
“However, outlook is still for a peak of inflation in the third quarter at around 3.7 percent to 3.8 percent to average 3.4 percent in 2017,” he said.
Cuyegkeng said inflation in 2018 could average 3.5 percent. Inflation rate refers to the average movement of consumer prices and is the biggest factor monitored by Bangko Sentral in setting its interest rates.
Cuyegkeng said Bangko Sentral’s earlier projection of an average 3 percent in 2018 implied a moderation of consumer prices next year and might signal a steady policy setting going forward.
Cuyegkeng said inflation in May might show modest pressures, averaging between 3.4 and 3.5 percent. He said external pressures related to US Federal Reserve’s tightening might require BSP policy response to steady some price pressures.
The Finance Department said May inflation likely slowed to 3.2 percent from 3.4 percent in April as food costs, particularly of vegetables, eased.
“This deceleration may be traced to the easing in food prices, primarily of vegetables, which are forecast to drop from 8.1 percent to 4.7 percent,” Finance Undersecretary Gil Beltran said in an economic bulletin.
The Duterte administration’s economic team set an inflation target of 2 percent to 4 percent this year and next.
The Philippine Statistics Authority is set to release the May inflation data next week.