The Bangko Sentral ng Pilipinas said inflation in June likely dropped to as low as 2.2 percent from 3.2 percent a month ago mainly due to lower rice and oil prices.
The BSP Department of Economic Research in a statement Friday estimated the June inflation settling within the range of 2.2 percent to 3.0 percent.
“Lower rice and domestic oil prices along with downward adjustment in electricity rates and recent peso appreciation are seen to temper inflation pressure during the month,” it said.
“Going forward, the BSP will remain watchful of the evolving inflation environment to ensure that the monetary policy stance remains consistent with the BSP’s price stability mandate,” it said.
Inflation in May rose to 3.2 percent from 3 percent in April, bringing the first five months’ average to 3.6 percent, still within the target range of 2 percent to 4 percent.
The benign inflation environment compelled the Monetary Board, the policy-making body of Bangko Sentral ng Pilipinas, to keep the benchmark policy rates steady at 4.5 percent on June 20.
The interest rates on the overnight lending and deposit facilities were also maintained.
Latest baseline forecasts indicated that inflation remained likely to settle within the target range of 2 percent to 4 percent both for 2029 and 2020, while inflation expectations had further moderated.
BSP Governor Benjamin Diokno also said the board noted that while real sector activity moderated in the first quarter, overall domestic economic activity was likely to remain firm, backed by a projected recovery in household spending and the continued implementation of the government’s infrastructure spending program.
“A prudent pause allows the BSP to observe and assess the impact of prior monetary adjustments including the phased reduction in the reserve requirements to be completed by the end of July,” Diokno said.
With the manageable inflation environment, the board cut the 2019 inflation forecast to 2.7 percent from the previous assumption of 2.9 percent during the May 9 meeting. The forecast for 2020 was likewise trimmed to 3 percent from 3.1 percent.
BSP Deputy Governor Diwa Guinigundo cited some reasons for the lowering of inflation forecasts for this year and 2020. These are lower oil prices, the appreciation of the peso and the actual inflation in May 2019.
He said global oil prices were now seen at $64.56 per barrel for 2019 from $68.90 per barrel during the May 9 meeting, and $61.35 per barrel from $67.10 per barrel for 2020.
The board now sees the peso closing the year at 52.01 per dollar for 2019 and 51.50 for 2020. These are stronger than the 52.06 and 51.78 assumptions, respectively, made in the May 9 meeting.
Guinigundo also said the board considered the benign inflation in the first five months, which averaged at 3.6 percent, well within the target range of 2 percent to 4 percent.