Inflation stayed at 4.5 percent for the third consecutive month in May, as meat prices remain high, data from the Philippine Statistics Authority on Friday show.
The inflation in May was faster than 2.1 percent registered in the same month last year. The PSA said the inflation rate averaged 4.5 percent in the first five months of 2021, above the government’s target range of 2 percent to 4 percent for the year.
Bangko Sentral ng Pilipinas Governor Benjamin Diokno said the May figure was within the BSP’s forecast range of 4.0 percent to 4.8 percent for the month.
“The latest outturn is consistent with expectations that inflation could remain above the high-end of the target range during the quarter as meat and oil prices remain elevated,” Diokno said.
“Nonetheless, the BSP expects inflation to decelerate to within the target range by the second half of 2021 to 2022 as domestic supply bottlenecks are addressed,” he said.
Diokno said the implementation of the temporary reduction in tariffs on imported pork was expected to address supply constraints and ease price pressures on meat products going forward.
He said the projected decline of inflation would depend on the timely arrival of pork to help stabilize domestic prices.
“Meanwhile, the BSP is of the view that risks to the inflation outlook are broadly balanced. The risks relate to the arrival of pork imports at lower tariffs, the successful reopening of the domestic economy, and the pace of the global economic recovery,” he said.
He said the Monetary Board, the policy-making body of the BSP, would consider the latest price developments during its meeting on June 24, 2021.
ING Bank Manila senior economist Nicholas Mapa said May marked the fifth successive month that inflation stayed above the target range.
“Above-target inflation constrains Diokno from cutting policy rates further while the disappointing first-quarter GDP reading is likely enough to convince Diokno that rates should stay where they are for now. With bank lending in negative territory for five months and counting, it’s clear that the banking sector is still in need of stimulus from monetary authorities,” Mapa said.
Mapa said inflation would likely decelerate in the coming months as supply conditions ease with inflation set to return within target by as early as July.
“We expect BSP to extend its pause for the balance of the year while penciling a possible rate hike by third quarter 2022 as economic conditions improve considerably,” Mapa said.
The PSA said the annual growth rates in the indices of the following commodity groups moved up at faster pace in May 2021: clothing and footwear, 1.7 percent; housing, water, electricity, gas and other fuels, 1.9 percent; furnishing, household equipment and routine maintenance of the house, 2.5 percent; health, 3.2 percent; and restaurant and miscellaneous goods and services, 3.8 percent.
Meanwhile, inflation decelerated in the indices of food and non-alcoholic beverages at 4.6 percent; and alcoholic beverages and tobacco, 11.8 percent. Likewise, the double-digit annual hike in the index of transport slowed down to 16.5 percent during the month.
The rest of the commodity groups remained at their previous month’s annual growth rates.
Excluding selected food and energy items, core inflation in May reached 3.3 percent, or the same annual rate recorded in the previous month.
Inflation for food index eased to 4.9 percent in May from 5.0 percent in the previous month. In May 2020, inflation for food index was noted at 2.9 percent.