Inflation rate in June likely accelerated to 4.9 percent from 4.6 percent in May because of base effects, education expenses and the increase in vegetable prices, the Finance Department said Tuesday.
Finance undersecretary Gil Beltran said in an economic bulletin the month-on-month inflation adjustment could be due mainly to the 2.43-percent rise in education costs during the opening of classes and 2.27-percent rise in vegetable prices that usually accompanied incessant rains at the onset of the wet season.
“Food prices contributed to the year-on-year uptick mainly due to vegetables while month-on-month inflation of fish and rice price moderated to 0.11 percent and 0.1 percent, respectively,” Beltran said.
He said the price increase from sin products (alcohol and tobacco) continued to be double-digit year-on-year, even as the month-on-month rate declined to 0.3 percent from 0.81 percent in May.
He said since products likely contributed as much as 0.46 percentage points to the June inflation rate.
“Non-food price also sees 0.33 percent month-on-month increase, driven by education and petroleum products but tempered by the decline in electricity rates,” he said.
The inter-agency Development Budget Coordination Committee on Monday adjusted upward the inflation forecast in 2018 to a range of 4 percent to 4.5 percent, taking into account the turnout in consumer prices in the first five months of the year.
“It is based on the year-to-date average inflation rate of 4.1 percent,” Budget Secretary Benjamin Diokno said in a text message.
The DBCC kept the inflation target at 2 percent to 4 percent from 2019 until 2022.
Diokno said despite the adjustment in 2018 forecast, there were signs that inflation was decelerating, with the month-on-month rate actually slowing down.
“With world price of oil slowing down and with rice importation done, we expect inflation rates in the second half of the year to start to taper off,” Diokno said.
Inflation in May hit 4.6 percent, up from 4.5 percent in April, bringing the first five months’ average to 4.1 percent, beyond the upper limit of the target range of 2 percent to 4 percent.
The Bangko Sentral ng Pilipinas said earlier that inflation expectations would remain within the target range for 2019.
The Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, raised for the second time this year the policy interest rates by 25 basis points to 3.5 percent on June 20.
The interest rates on the overnight lending and deposit facilities were also increased accordingly.
The Monetary Board noted that inflation expectations remained elevated for 2018 and that the risk of possible second-round effects from ongoing price pressures argued for follow-through monetary policy action.
The June rate hike was the second time this year after the first 25-bps increase on May 10, 2018. BSP Governor Nestor Espenilla expressed confidence that the two rate hikes would be sufficient for inflation to return to the target range of 2 percent to 4 percent in 2019.